Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/65788
Authors: 
Battilossi, Stefano
Escario, Regina
Foreman-Peck, James
Year of Publication: 
2010
Series/Report no.: 
Cardiff Economics Working Papers E2010/5
Abstract: 
Was Spanish fiscal policy destabilizing? We estimate policy reaction functions and test the impact of fiscal shocks on growth volatility over the period 19501998. We find that a transition from pro-cyclical to countercyclical fiscal policy occurred in the late years of the Franco regime, contributing to the stabilization of the growth pattern. The timing of the shift, between the late 1960s and early 1970s, was not determined by a single policy change, but rather by gradual pressure from economic liberalization, the external constraint imposed by a fixed exchange rate regime and the modernization of fiscal policy instruments. The aggressiveness of fiscal shocks also decreased over time, thus contributing to the progressive stabilization of output growth. There appears to be little necessity to appeal to a 'Great Moderation' of monetary policy to understand the greater stability of the Spanish economy from the 1980s.
Subjects: 
fiscal reaction function
fiscal shocks
SVAR
growth volatility
JEL: 
E32
E62
N14
Document Type: 
Working Paper

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