BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 13/2013:
Fiscal policy and regional output volatility: Evidence from Russia
Markus Eller ()
, Jarko Fidrmuc ()
and Zuzana Fungácová ()
Abstract: This paper investigates the relationship between fiscal
policy and output volatility in Russian regions between 2000 and 2009.
System GMM estimation techniques are used to account for potential
endogeneity between output volatility and fiscal developments. Our main
finding is that fiscal activism, proxied by various measures of
discretionary fiscal policy, contributes to output volatility and so
induces macroeconomic instability at the regional level in Russia. This
result corroborates previous studies using cross-country data. To reduce
business cycle fluctuations, it would be necessary to curtail pro-cyclical
fiscal activism at the regional level, e.g. via fiscal rules and sound
institutions of fiscal federalism.
Keywords: output volatility; automatic stabilizers; discretionary fiscal policy; dynamic panel models; Russia; (follow links to similar papers)
JEL-Codes: E32; E62; R11; (follow links to similar papers)
43 pages, June 17, 2013
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