Research Discussion Papers, Bank of Finland
No 15/2005:
Fiscal policy in the 1920s and 1930s How much different it is from the post war period's policies?
Matti Virén ()
Abstract: This paper deals with the fiscal behaviour of governments
in the 1920s and 1930s. The intention is to see whether there were the same
features in government behaviour as in the post-World War II era. In
par-ticular, attention is paid to asymmetric fiscal policies, ie the
question of whether government deficits react differently to income growth
and inflation during depressions and booms. The analysis is carried out
us-ing data primarily from the League of Nations. The data come from 32
countries and covers the period 1925–1938. Estimation results suggest the
in pre-war period deficits were much less sensitive to output and did not
show as many asymmetric features as in post-war period. Otherwise, the same
regularities apply to the empirical results. In particular, this is true
with the disciplinary role of government debt in terms of budget
deficits.
Keywords: fiscal policy; deficit; asymmetric behaviour; (follow links to similar papers)
JEL-Codes: E62; H62; (follow links to similar papers)
32 pages, July 11, 2005
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