The present study was aimed to investigate the effects of oil price shocks on discretionary fiscal policies in selected OPEC countries during 1980-2015. In this regard, the heterogeneous dynamic reaction to structural shock was examined using Panel Structural Vector Autoregressive (PSVAR) technique. Based on the findings, the effect of oil price shocks on discretionary fiscal policy was positiv...

This paper analyses the effects of discretionary fiscal policy by presenting new empirical evidence for Germany within a structural vector autoregression (SVAR) framework. Following Blanchard and Perotti (2002), the SVAR model is identified by applying institutional information. We find no compelling evidence for the effectiveness of discretionary fiscal policy. Cutting taxes does not tend to s...

A decade ago in a paper, “Reassessing Discretionary Fiscal Policy,” published in the Journal of Economic Perspectives, I concluded that “in the current context of the US economy, it seems best to let fiscal policy have its main countercyclical impact through the automatic stabilizers ... It would be appropriate in the current circumstances for discretionary fiscal policy to be saved explicitly ...

n 1992, President Bush proposed legislation intended to speed up the recovery from the 1990-91 recession. Congress rejected this proposal for countercyclical fiscal policy stimulus. In early 1993 President Clinton proposed his own stimulus package, but Congress rejected this proposal too. Many reasons were given for deciding against these two discretionary fiscal policy proposals, but perhaps t...

We study discretionary non-cooperative monetary and fiscal policy stabilization in the New Keynesian model, where the fiscal authority uses distortionary taxes as policy instrument. We explicitly model different frequencies of fiscal and monetary policy operations. We find that standard models of monetary and fiscal policy interactions may substantially overestimate the social gain from the sta...

We study the sustainability of public debt in a closed production economy where a benevolent government chooses fiscal policies, including haircuts on its outstanding debt, in a discretionary manner. Government bonds are held by domestic agents to smooth consumption over time and because they provide collateral and liquidity services. We characterize a recursive equilibrium where public debt am...

This paper investigates the impact of terms of trade movements on the stance of fiscal policy. This analysis is timely and important because the volatility of the terms of trade has increased in recent years, largely due to significant fluctuations in commodity prices. Moreover, the prominence of fiscal policy has increased as countries have adopted aggressive discretionary actions to combat th...

This paper uses a large panel data set to examine the relation between elections and fiscal policy. We find evidence of political budget cycles in both developed and developing countries: government spending increases before elections while revenues fall, leading to a larger deficit in election years. We demonstrate that political budget cycles are much larger in developing countries than in de...