Fiscal Policy and Economic Activity in South Asia

This paper analyzes whether fiscal policy in South Asia amplifies or smooths business cycle fluctuations. The paper estimates several econometric models to explore the cyclicality of government spending and tax buoyancy. The findings show that fisc...

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Main Authors:	Beyer, Robert C.M., Milivojevic, Lazar
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2019
Subjects:	FISCAL POLICY FISCAL MULTIPLIER GOVERNMENT SPENDING PUBLIC EXPENDITURE TAXATION TAX BUOYANCY
Online Access:	http://documents.worldbank.org/curated/en/711041553536608365/Fiscal-Policy-and-Economic-Activity-in-South-Asia http://hdl.handle.net/10986/31451

id	okr-10986-31451
recordtype	oai_dc
spelling	okr-10986-314512022-09-17T12:16:34Z Fiscal Policy and Economic Activity in South Asia Beyer, Robert C.M. Milivojevic, Lazar FISCAL POLICY FISCAL MULTIPLIER GOVERNMENT SPENDING PUBLIC EXPENDITURE TAXATION TAX BUOYANCY This paper analyzes whether fiscal policy in South Asia amplifies or smooths business cycle fluctuations. The paper estimates several econometric models to explore the cyclicality of government spending and tax buoyancy. The findings show that fiscal policy is procyclical in most countries. In South Asia, tax revenue increases less than one to one with gross domestic product, but public spending increases more than proportionally. While changes in tax revenue have no significant impact on economic activity, the government spending multiplier is positive and significant: an additional 1 USD of spending leads to an immediate increase in gross domestic product of 0.3 USD and a cumulative increase of 0.6 USD. The impact of public spending on economic activity is entirely due to capital expenditure, which is also more procyclical. Procyclical public spending and a positive expenditure multiplier imply that fiscal policy in South Asia amplifies boom-and-bust cycles. 2019-03-27T15:09:21Z 2019-03-27T15:09:21Z 2019-03 Working Paper http://documents.worldbank.org/curated/en/711041553536608365/Fiscal-Policy-and-Economic-Activity-in-South-Asia http://hdl.handle.net/10986/31451 English Policy Research Working Paper;No. 8792 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia South Asia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	FISCAL POLICY FISCAL MULTIPLIER GOVERNMENT SPENDING PUBLIC EXPENDITURE TAXATION TAX BUOYANCY
spellingShingle	FISCAL POLICY FISCAL MULTIPLIER GOVERNMENT SPENDING PUBLIC EXPENDITURE TAXATION TAX BUOYANCY Beyer, Robert C.M. Milivojevic, Lazar Fiscal Policy and Economic Activity in South Asia
geographic_facet	South Asia South Asia
relation	Policy Research Working Paper;No. 8792
description	This paper analyzes whether fiscal policy in South Asia amplifies or smooths business cycle fluctuations. The paper estimates several econometric models to explore the cyclicality of government spending and tax buoyancy. The findings show that fiscal policy is procyclical in most countries. In South Asia, tax revenue increases less than one to one with gross domestic product, but public spending increases more than proportionally. While changes in tax revenue have no significant impact on economic activity, the government spending multiplier is positive and significant: an additional 1 USD of spending leads to an immediate increase in gross domestic product of 0.3 USD and a cumulative increase of 0.6 USD. The impact of public spending on economic activity is entirely due to capital expenditure, which is also more procyclical. Procyclical public spending and a positive expenditure multiplier imply that fiscal policy in South Asia amplifies boom-and-bust cycles.
format	Working Paper
author	Beyer, Robert C.M. Milivojevic, Lazar
author_facet	Beyer, Robert C.M. Milivojevic, Lazar
author_sort	Beyer, Robert C.M.
title	Fiscal Policy and Economic Activity in South Asia
title_short	Fiscal Policy and Economic Activity in South Asia
title_full	Fiscal Policy and Economic Activity in South Asia
title_fullStr	Fiscal Policy and Economic Activity in South Asia
title_full_unstemmed	Fiscal Policy and Economic Activity in South Asia
title_sort	fiscal policy and economic activity in south asia
publisher	World Bank, Washington, DC
publishDate	2019
url	http://documents.worldbank.org/curated/en/711041553536608365/Fiscal-Policy-and-Economic-Activity-in-South-Asia http://hdl.handle.net/10986/31451
_version_	1764474361095389184

Fiscal Policy and Economic Activity in South Asia

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