7.5.2013
at 10:30
Fiscal Policy and Regional Output Volatility: Evidence from Russia
Markus Eller
Oesterreichische Nationalbank
Jarko Fidrmuc
Zeppelin University Friedrichshafen, OEI Regensburg
Comenius University Bratislava
Zuzana Fungáčová
Bank of Finland
Abstract
This paper investigates the relationship between fiscal policy and output volatility in Russian regions between 2000 and 2009. System GMM estimation techniques are applied to account for potential endogeneity between output volatility and fiscal developments. Our main finding is that fiscal activism, approximated by various measures of discretionary fiscal policy, increases output volatility and thus induces macroeconomic instability. This result corroborates previous studies using cross-country data. To minimize business cycle fluctuations, it would be necessary to curtail fiscal activism at the regional level, e.g. by appropriate fiscal rules and sound fiscal federalism institutions.
JEL Codes: E32, E62, R11.
Keywords: business cycles, output volatility, automatic stabilizers, discretionary fiscal policy, dynamic panel models
BOFIT seminars
The seminars are open to all economists interested in the subject areas covered.
You need to pre-register for the seminar with
Ms India Roland (firstname.lastname@bof.fi, phone +358 10 831 2365).
Seminar will be held at Rauhankatu 19, 3rd floor seminar room (arrive at the Bank's Rauhankatu 19 entrance, from where you will be escorted to the BOFIT seminar room).
The seminars are open to all economists interested in the subject areas covered.
You need to pre-register for the seminar with
Ms India Roland (firstname.lastname@bof.fi, phone +358 10 831 2365).
Seminar will be held at Rauhankatu 19, 3rd floor seminar room (arrive at the Bank's Rauhankatu 19 entrance, from where you will be escorted to the BOFIT seminar room).