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Procyclical Fiscal Policy

  • Toshihiro Ihori
  • Keigo Kameda
Book
  • 352 Downloads

Part of the SpringerBriefs in Economics book series (BRIEFSECONOMICS)

Also part of the Development Bank of Japan Research Series book sub series (BRIEFSDBJRS)

Table of contents

  1. Front Matter
    Pages i-xiii
  2. Toshihiro Ihori, Keigo Kameda
    Pages 1-25
  3. Toshihiro Ihori, Keigo Kameda
    Pages 27-43
  4. Toshihiro Ihori, Keigo Kameda
    Pages 45-68

About this book

Introduction

Conventional wisdom dictates that a fiscal policy should be counter-cyclical. However, contrary to this conventional views, recent research has demonstrated that fiscal policy is actually procyclical in most developing countries. In this book, we attempt to propose a new interpretation of this procyclicality after reviewing theoretical and empirical evolution of the research. In particular, by incorporating the political effort behavior of private agents into a weak government model, we explore how income fluctuations affect the optimal budget deficits in a political economy. If the government can control the political behavior, normally, the optimal budget deficit should rise in a recession as a first-best case; however, interestingly, a recession does not necessarily prompt an increase in the budget deficits in a second-best political economy. The response of the budget deficits to income fluctuations mainly depends on the efficiency of political effort, which may correspond to the degree of democracy and bureaucratic efficiency of the governments. We test the prediction of the pro-cyclical fiscal policy and find it applicable for democratic countries with semi-efficient governments including Japan.

Keywords

fiscal policy procyclicality deficit ceiling fiscal privilege political effort income fluctuation

Authors and affiliations

  • Toshihiro Ihori
    • 1
  • Keigo Kameda
    • 2
  1. 1.National Graduate Institute for Policy StudiesMinato-kuJapan
  2. 2.Kwansei Gakuin UniversitySandaJapan

Bibliographic information

  • DOI https://doi.org/10.1007/978-981-13-2995-1
  • Copyright Information Development Bank of Japan 2018
  • Publisher Name Springer, Singapore
  • eBook Packages Economics and Finance
  • Print ISBN 978-981-13-2994-4
  • Online ISBN 978-981-13-2995-1
  • Series Print ISSN 2191-5504
  • Series Online ISSN 2191-5512
  • Buy this book on publisher's site