Social Sciences Forum Mullen Lecture with Dr. Carlos Vegh
organized by the Department of Economics
Location
Library and Gallery, Albin O. Kuhn : 7th Floor
Date & Time
November 15, 2022, 4:00 pm – 5:30 pm
Description
Carlos Vegh, Ph.D.
Fred H. Sanderson Professor of International Economics; Johns Hopkins University
Fiscal Policy Procyclicality: Evidence and Theory
This lecture will examine how fiscal policy is conducted over the business cycle in both developing and developed countries. We will first show that, by and large, fiscal policy is countercyclical (i.e., expansionary in bad times and contractionary in good times) in developed countries, but procyclical (i.e., expansionary in good times and contractionary in bad times) in developing countries. Procyclical fiscal policy in developing countries is a puzzle because it amplifies an already volatile business cycle. We will then review different theoretical explanations that could account for this puzzle, such as lack of access to international credit markets in bad times and political-economy distortions. Finally, we will present evidence on the phenomenon of “graduation” from fiscal procyclicality, which refers to countries that have managed to switch over time from procyclicality to countercyclicality, and link it to fiscal rules and improvements in institutional quality.
Organized by the Department of Economics and cosponsored by the Center for Social Science Scholarship.
Photo courtesy of C. Vegh.
This lecture will be recorded and available following the event on CS3's YouTube channel.
This lecture will examine how fiscal policy is conducted over the business cycle in both developing and developed countries. We will first show that, by and large, fiscal policy is countercyclical (i.e., expansionary in bad times and contractionary in good times) in developed countries, but procyclical (i.e., expansionary in good times and contractionary in bad times) in developing countries. Procyclical fiscal policy in developing countries is a puzzle because it amplifies an already volatile business cycle. We will then review different theoretical explanations that could account for this puzzle, such as lack of access to international credit markets in bad times and political-economy distortions. Finally, we will present evidence on the phenomenon of “graduation” from fiscal procyclicality, which refers to countries that have managed to switch over time from procyclicality to countercyclicality, and link it to fiscal rules and improvements in institutional quality.
Organized by the Department of Economics and cosponsored by the Center for Social Science Scholarship.
Photo courtesy of C. Vegh.
