DP8009 International Differences in Fiscal Policy During the Global Crisis

Author(s):	Agustín Bénétrix, Philip R. Lane
Publication Date:	September 2010
Keyword(s):	fiscal policy, global crisis
JEL(s):	E60, F41, H60
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=8009

We examine the cross-country dispersion in fiscal outcomes during 2007-2009. In principle, international differences in fiscal policy may be related to differences in optimal fiscal positions, funding constraints, political economy factors and fiscal control problems. We find that the decline in the overall and structural fiscal balances have been larger for those countries experiencing larger increases in unemployment and where credit growth during the pre-crisis period was more rapid. However, there is no systematic co-variation between fiscal outcomes and a larger number of other macroeconomic variables and country characteristics.