The paper "Revisiting Fiscal Countercyclicality" presents a novel dataset analyzing the time-varying measures of fiscal policy's countercyclicality across advanced and developing economies from 1980 to 2021. It addresses the limitations of previous studies by employing time-varying measures of fiscal stabilization, accounting for both country-specific and global factors.
Increased Counter-Cyclicality During Severe Crises: Fiscal policy tends to be more counter-cyclical during severe crises than during typical recessions, particularly in advanced economies.
Temporal Increase in Counter-Cyclicality: Over the last two decades, fiscal counter-cyclicality has notably increased for many economies.
Differences Between Advanced and Low-Income Countries: Discretionary and automatic countercyclic fiscal policies are strong in advanced economies, whereas they are acyclical or sometimes procyclical in low-income countries.
Expenditure Channel Dominance: Fiscal countercyclicality operates primarily through the expenditure channel, particularly for social benefits.
Determinants of Fiscal Counter-Cyclicality: Better financial development, larger government size, and stronger institutional quality are associated with enhanced countercyclical effects of fiscal policy.
The findings suggest that fiscal policy can play a crucial role in stabilizing economies, especially during severe crises, and that there is room for improvement in balancing discretionary and automatic stabilizers. The paper highlights the importance of financial development, government size, and institutional quality in enhancing the effectiveness of fiscal countercyclicality.
The paper includes a comprehensive list of references and citations, providing a solid foundation for further research and analysis in the field of fiscal policy counter-cyclicality.
This paper contributes significantly to the ongoing discourse on fiscal policy, offering valuable insights into the dynamics of fiscal countercyclicality and its determinants.