It's politics, stupid!
Open access
Date
2014-08Type
- Working Paper
ETH Bibliography
yes
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Abstract
Relying on a large sample of countries, this paper quantifies the effect of political constraints, as measured by legislative control by the incumbent government, on the size of fiscal stimulus packages that have been put in place as reaction to the Great Recession. The results suggest that on average, political constraints reduced the size of a country's fiscal stimulus packages by between 1.2 and 2.8 percentage points of GDP (depending on the stimulus measure used). This substantial effect is significant and robust to a number of alternative dependent variables and specifications. The results are thus in line with the widely held, but never tested, perception that political reality limits the de facto application of discretionary fiscal policy as reaction to negative economic shocks. Show more
Permanent link
https://doi.org/10.3929/ethz-a-010200330Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
GROSS NATIONAL PRODUCT; POLITICAL INFLUENCE (INTERNAL POLITICS); ECONOMIC CRISES; Great Recession; REZESSION (WIRTSCHAFT, GELD UND WÄHRUNG); POLITISCHE EINFLUSSNAHME (INNENPOLITIK); WIRTSCHAFTSKRISEN; Legislative control; GESETZGEBENDE GEWALT + LEGISLATIVE (STAATSRECHT); LEGISLATIVE POWER OF THE STATE + LEGISLATIVE POWER (PUBLIC LAW); BRUTTONATIONALEINKOMMEN; RECESSION (ECONOMY, MONEY AND CURRENCY); KONJUNKTURPOLITIK; Fiscal stimulus; STABILIZATION POLICYOrganisational unit
03716 - Sturm, Jan-Egbert / Sturm, Jan-Egbert
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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ETH Bibliography
yes
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