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International Differences in Fiscal Policy During the Global Crisis

Philip R Lane, Institute for International Integration Studies, Trinity College Dublin
Agustin Benetrix, Institute for International Integration Studies, Trinity College Dublin

IIIS Discussion Paper No. 336

Abstract

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.


Last updated 28 August 2014 by IIIS (Email).