Public Spending During Growth Accelerations and Decelerations: Exploring the Interaction of the Business Cycle and Control of Corruption

22 Pages Posted: 30 Jan 2012

See all articles by Ronald U. Mendoza

Ronald U. Mendoza

Ateneo De Manila University - Ateneo School of Government

Nadia Doytch

University of New Haven

Joshua P. Greenstein

The New School

Date Written: February 1, 2012

Abstract

The present paper analyzes the cyclicality of public spending on key social, economic and military sectors, including agriculture, education, health, social protection, transportation and military spending using data available for up to 40 developing countries spanning the period from 1980 to 2004. It utilizes measures of governance as well as indicators for growth acceleration and deceleration episodes to try and tease out possible spending patterns juxtaposed against these conditions. This paper finds evidence that total public spending is largely procyclical during growth decelerations and it is acyclical during growth accelerations. Better governance indicators are also associated with a tempering of this procyclicality of total public spending. In addition, even as total public spending may be procyclical, its subcomponent parts need not be. Finally, military spending tends to be acyclical, suggesting that it neither gets cut nor surges systematically during growth accelerations or decelerations.

Keywords: business cycle, governance, social spending, fiscal space, countercyclical fiscal policy

JEL Classification: E62, H50, O23

Suggested Citation

Mendoza, Ronald U. and Doytch, Nadia and Greenstein, Joshua P., Public Spending During Growth Accelerations and Decelerations: Exploring the Interaction of the Business Cycle and Control of Corruption (February 1, 2012). Available at SSRN: https://ssrn.com/abstract=1988108 or http://dx.doi.org/10.2139/ssrn.1988108

Ronald U. Mendoza (Contact Author)

Ateneo De Manila University - Ateneo School of Government ( email )

Katipunan Road
Loyola Heights
Quezon City, 1108
Philippines

Nadia Doytch

University of New Haven ( email )

West Haven, CT 06516
United States

Joshua P. Greenstein

The New School ( email )

66 Fifth Avenue
New York, NY 10011
United States

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