Assessing activist fiscal policy in advanced and emerging market economies using real-time data

Abstract

We examine activist fiscal policy in advanced and emerging economies using an innovative methodology. We contribute to the existing literature on fiscal policy cyclicality by conducting real-time data analysis for a broad set of countries that include 23 advanced and 30 emerging market economies. To the best of our knowledge this is the first study to extend the real-time data analysis to countries other than advanced economies. We also examine the impact of the global financial crisis. Our main findings show that discretionary fiscal policy in advanced economies is planned as countercyclical before the global financial crisis, but its implementation turned procyclical after the crisis. The emerging economies had weakly countercyclical discretionary fiscal policy plans, which enabled them to implement countercyclical fiscal policy after the global financial crisis.