Government Spending Cyclicality: Evidence from Rainfall Shocks as an Instrument for Cyclical Income

43 Pages Posted: 1 Nov 2011

See all articles by Markus Bruckner

Markus Bruckner

University of Adelaide

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Date Written: October 2011

Abstract

This research revisits the cyclicality of fiscal policies. To identify and estimate more precisely the magnitude of a causal effect of cyclical income on government spending, we employ annual rainfall data as an instrument for national income in the context of sub-Saharan countries. Our results confirm procyclical behavior of government spending and of tax revenues; debt and deficit are found to be countercyclical. Specifically, government spending is procyclical during upturns and acyclical during downturns. We also find that its procyclicality is correlated with corruption, especially among democracies.

Keywords: cyclicality, Fiscal policy

JEL Classification: E62

Suggested Citation

Bruckner, Markus and Gradstein, Mark, Government Spending Cyclicality: Evidence from Rainfall Shocks as an Instrument for Cyclical Income (October 2011). CEPR Discussion Paper No. DP8622, Available at SSRN: https://ssrn.com/abstract=1952483

Markus Bruckner (Contact Author)

University of Adelaide ( email )

No 233 North Terrace, School of Commerce
Adelaide, South Australia 5005
Australia

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+97 2 8647 2288 (Phone)
+97 2 8647 2941 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2
Abstract Views
386
PlumX Metrics