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This time truly is different: The cyclical behaviour of fiscal policy during the Covid-19 crisis.

ABSTRACT: Fiscal policy was more countercyclical during the Covid-19 crisis than in previous (crisis) episodes. This paper presents empirical evidence in favour of a "this time truly is different" moment based on analysing the cyclical behaviour of fiscal policy for 28 advanced economies over 1995-2021. Discretionary fiscal policy during the Covid-19 crisis (2020-2021) did more to counteract the downturn - especially in the Eurozone -, as we do not find comparable evidence for countercyclicality during the financial crisis or Euro crisis. Automatic fiscal stabilisers, the non-discretionary domain of fiscal policy, significantly contributed to countercyclical stabilisation during the pandemic.

SUBMITTER: Heimberger P

PROVIDER: S-EPMC10028344 | biostudies-literature | 2023 Jun

REPOSITORIES: biostudies-literature

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This time truly is different: The cyclical behaviour of fiscal policy during the Covid-19 crisis.

Heimberger Philipp P

Journal of macroeconomics 20230321

Fiscal policy was more countercyclical during the Covid-19 crisis than in previous (crisis) episodes. This paper presents empirical evidence in favour of a "this time truly is different" moment based on analysing the cyclical behaviour of fiscal policy for 28 advanced economies over 1995-2021. Discretionary fiscal policy during the Covid-19 crisis (2020-2021) did more to counteract the downturn - especially in the Eurozone -, as we do not find comparable evidence for countercyclicality during th ...[more]

PMID: 36987431

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