Working Paper: NBER ID: w19828
Authors: Carlos A. Vegh; Guillermo Vuletin
Abstract: This paper studies the social implications of fiscal policy responses to crises in Latin America over the last 40 years and in the Eurozone during the aftermath of the global financial crisis. We focus on the behavior of four social indicators: the poverty rate, income inequality, unemployment rate, and domestic conflict. We find a causal link from counteryclical (procyclical) fiscal policy responses to reductions (increases) in all four social indicators. These results call into question recent claims on "expansionary fiscal austerity."
Keywords: fiscal policy; social indicators; Latin America; Eurozone; crisis
JEL Codes: E62; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| countercyclical fiscal policy responses (E62) | reductions in poverty (I32) |
| countercyclical fiscal policy responses (E62) | reductions in income inequality (D31) |
| countercyclical fiscal policy responses (E62) | reductions in unemployment (J68) |
| countercyclical fiscal policy responses (E62) | reductions in domestic conflict (D74) |
| procyclical fiscal policies (E62) | increases in poverty (I32) |
| procyclical fiscal policies (E62) | increases in income inequality (D31) |
| procyclical fiscal policies (E62) | increases in unemployment (J64) |
| procyclical fiscal policies (E62) | increases in domestic conflict (J12) |
| fiscal readiness index (E62) | countercyclical fiscal policy responses (E62) |