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Title:De facto fiscal space and fiscal stimulus: Definition and assessment PDF Logo
Authors:Aizenman, Joshua
Jinjarak, Yothin
Issue Date:2010
Series/Report no.:Working Papers, Santa Cruz Institute for International Economics 10-20
Abstract:We define the notion of 'de facto fiscal space' of a country as the outstanding public debt relative to the de facto tax base, where the latter measures the realized tax collection, averaged across several years to smooth for business cycle fluctuations. We apply this concept to account for the cross-country variation in the fiscal stimulus associated with the global crisis of 2009- 2010. We find that greater de facto fiscal space prior to the global crisis, higher GDP/capita, higher financial exposure to the US, and higher inflation were associated with a higher fiscal stimulus/GDP during 2009-2010. Intriguingly, higher trade openness has been associated with lower fiscal stimulus.
Subjects:fiscal space
fiscal stimulus
trade openness
JEL:E62
F42
Document Type:Working Paper
Appears in Collections:Working Papers, Santa Cruz Institute for International Economics, UC Santa Cruz

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