Working Paper: NBER ID: w16779
Authors: Joshua Aizenman; Gurnain Kaur Pasricha
Abstract: This paper studies the patterns of fiscal stimuli in the OECD countries propagated by the global crisis. Overall, we find that the USA net fiscal stimulus was modest relative to peers, despite it being the epicenter of the crisis, and having access to relatively cheap funding of its twin deficits. The USA is ranked at the bottom third in terms of the rate of expansion of the consolidated government consumption and investment of the 28 countries in sample. Contrary to historical experience, emerging markets had strongly countercyclical policy during the period immediately preceding the Great Recession and the Great Recession. Many developed OECD countries had procyclical fiscal policy stance in the same periods. Federal unions, emerging markets and countries with very high GDP growth during the pre-recession period saw larger net fiscal stimulus on average than their counterparts. We also find that greater net fiscal stimulus was associated with lower flow costs of general government debt in the same or subsequent period.
Keywords: Fiscal Stimulus; Great Recession; OECD; Countercyclical Policy; Emerging Markets
JEL Codes: E62; F36; H77
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| greater net fiscal stimulus (E62) | lower flow costs of public debt (H63) |
| greater net fiscal stimulus (E62) | GDP growth (O49) |
| fiscal policy decisions (E62) | economic outcomes (F61) |
| economic context (E66) | fiscal responses (E62) |
| federal structure (H77) | fiscal policy effectiveness (E62) |
| higher fiscal expenditure (H59) | no increased borrowing costs (H74) |