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Do the OECD Countries Follow the Same Fiscal Policy Rule?

  • Economics


This paper tries to assess fiscal policy rules in the OECD countries. In particular, we examine whether the EU/EMU countries have had the same rule in terms of the cyclical situation. The analysis is based on a simple VAR model for output growth, inflation and a fiscal indicator. Empirical analysis with data from 21 OECD countries for 1960 - 1996 shows that fiscal policy rules differ considerably between OECD countries. In most EMU-11 countries the counter-cyclical nature of policy is very weak while in most other countries notably in the Anglo-Saxon countries the countercyclical nature is quite pronounced.

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