Journal ArticleDOI
Sovereign Risk and Procyclical Fiscal Policy in Emerging Market Economies
TLDR
This paper developed a dynamic stochastic general equilibrium model to account for the differences in fiscal policy stance over the business cycle between developed and emerging market countries, and, in particular, for the volatile and procyclical government consumption and transfer payment in emerging markets.Abstract:
This study develops a dynamic stochastic general equilibrium model to account for the differences in fiscal policy stance over the business cycle between developed and emerging market countries, and, in particular, for the volatile and procyclical government consumption and transfer payment in emerging market countries. Two models with and without default option in sovereign borrowings replicate the contrasting cyclical behaviors indicating that the default option is responsible for procyclical fiscal policy. Further, augmented model with third-party bailouts, together with the stochastic trend income process, successfully predicts high volatilities of fiscal expenditures. These imply that procyclical fiscal policy, entailed by default option, may exacerbate the business cycle in emerging market countries.read more
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Code and data files for "Fiscal Policy and Default Risk in Emerging Markets"
TL;DR: In this article, all Matlab and C++ programs necessary to produce the results of the article were described and a spreadsheet with Mexican data was also provided, along with a spreadsheet containing Mexican data.
Informal Sector, Business Cycles, and Fiscal Policy.
TL;DR: In this paper, a systematic review of the literature on the cyclical behavior of fiscal policy along three dimensions: (i) the set of theories, (ii) measurement of cyclicality of the fiscal policy, and (iii) empirical evidence.
Journal ArticleDOI
On Sovereign Credit Ratings and Pro-Cyclical Fiscal Policy
TL;DR: In this paper, a non-monotonic relation between the procyclicality of government consumption and sovereign risk scores has been found for 93 countries and for more than 30 years, panel data econometric analyses show that vulnerable countries are more constrained in borrowing during economic downturns and must reinforce fiscal disciplines to repay debts in recessions.
Journal ArticleDOI
Do Fiscal Rules Constrain Fiscal Policy in Romania
TL;DR: In this paper, the authors used the ARDL model to apply the Granger causality test, using quarterly data for a set of four indicators, being identified that Romanian fiscal rules restrict fiscal policy.
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The Relationship of Fiscal Policy and Economic Cycle: Is Vietnam Different?
Dung X. Nguyen,Trung Duc Nguyen +1 more
TL;DR: In this paper , the authors examined the relationship between fiscal policy and economic cycle in Vietnam, a developing economy with dramatic change since 2000 by analyzing quarterly data over a twenty-year period beginning in 2000 by using the Vector Error-Correction Model.
References
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Book
General Theory of Employment, Interest and Money
TL;DR: In this article, a general theory of the rate of interest was proposed, and the subjective and objective factors of the propensity to consume and the multiplier were considered, as well as the psychological and business incentives to invest.
Journal ArticleDOI
Debt with Potential Repudiation: Theoretical and Empirical Analysis
Jonathan Eaton,Mark Gersovitz +1 more
Journal ArticleDOI
The Voracity Effect
Aaron Tornell,Philip R. Lane +1 more
TL;DR: In this paper, the authors analyze an economy that lacks a strong legal-political institutional infrastructure and is populated by multiple powerful groups, and they show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks.
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Emerging market business cycles: the cycle is the trend
Mark Aguiar,Gita Gopinath +1 more
TL;DR: In this article, the authors find that shocks to trend growth rather than transitory fluctuations around a stable trend are the primary source of fluctuations in emerging markets, and the key features of emerging market business cycles are then shown to be consistent with this underlying income process in an otherwise standard equilibrium model.
Real Business Cycles in a Small Open Economy: The Canadian Case
TL;DR: In this article, a real-business-cycle model of a small open economy is proposed to rationalize the observed pattern of postwar Canadian business fluctuations, which is consistent with the observed positive correlation between savings and investment, even though financial capital is perfectly mobile, and with countercyclical fluctuations in external trade.