Cliometrica

, Volume 7, Issue 3, pp 267–294

Fiscal policy response to cycles under two regimes: Spain 1950–1998

  • Stefano Battilossi
  • Regina Escario
  • James Foreman-Peck
Original Paper

Abstract

In the second half of the 20th century, Spain provides a case of political regime change, which according to some political economy models should also lead to a shift in the cyclical nature of fiscal policy. We find that in most of the pre-democratic era, there was a strong procyclical bias to fiscal policy. Eradication began in the last years of the autocratic regime under the influence of fiscal institutional reform and perhaps learning. It was completed after the transition to democracy when countercyclical fiscal policy was reinforced in the late 1980s by membership of the European Exchange Rate Mechanism. This experience, established by two separate econometric identification procedures, as well as a narrative drawing especially upon OECD and EIU reports, runs counter to the predictions of the political economy models of Lane (J Public Econ 87(12):2661–2675, 2003) and Alesina et al. (J Eur Econ Assoc 5:1006–1036, 2008).

Keywords

Fiscal policy Business cycle Regime change 

JEL Classification

E32 E62 N14 

Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  • Stefano Battilossi
    • 2
  • Regina Escario
    • 3
  • James Foreman-Peck
    • 1
  1. 1.Cardiff Business SchoolCardiff UniversityCardiffUK
  2. 2.Department of Economic History and InstitutionsUniversidad Carlos III de MadridMadridSpain
  3. 3.Department of Applied EconomicsUniversidad de ZaragozaZaragozaSpain

Personalised recommendations