Abstract
There is a huge literature on the behaviour of scal variables in relation to the output cycle. In this paper, we show that scal variables also co-vary with the nancial cycle, as captured by uctuations in the current account balance and credit growth. These nancial factors aect scal outcomes, over and above their inuence on the output cycle. We argue that scal surveillance and the design of scal rules should pay close attention to the interaction between the nancial cycle and the scal cycle.
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