What Makes Discretionary Counter-Cyclical Fiscal Policy so Difficult? An Analysis of 32 OECD Countries

Abstract We examine the stance of fiscal policy for 32 OECD countries from 1986 to 2023 by comparing each country-year observation signs output gap and change in cyclically adjusted budget balance. find that policies are often pro-cyclical. test possible explanations using comparative statistics observations with pro- counter-cyclical policies. Our evidence suggests rules institutional quality not related prevalence pro-cyclicality. Likewise, several political-economy arguments suggested explaining pro-cyclical do receive strong support. However, poor access finance makes more (JEL codes: E62, H50, H62)