It's politics, stupid! Political constraints determine governments' reactions to the Great Recession

Arbeitspapier

Relying on a large sample of countries, this paper quantifies the effect of political constraints, as measured by legislative control by the incumbent government, on the size of fiscal stimulus packages that have been put in place as reaction to the Great Recession. The results suggest that on average, political constraints reduced the size of a country's fiscal stimulus packages by between 1.2 and 2.8 percentage points of GDP (depending on the stimulus measure used). This substantial effect is significant and robust to a number of alternative dependent variables and specifications. The results are thus in line with the widely held, but never tested, perception that political reality limits the de facto application of discretionary fiscal policy as reaction to negative economic shocks.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: KOF Working Papers ; No. 365

Classification and Topics

• Classification: Wirtschaft ; Institutions and the Macroeconomy ; Business Fluctuations; Cycles ; Fiscal Policy ; Studies of Particular Policy Episodes ; Crisis Management ; Other Economic Systems: Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
• Subject: legislative control ; fiscal stimulus ; Great Recession

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gunzinger, Fabian ; Sturm, Jan-Egbert
• Event: Veröffentlichung
• (who): ETH Zurich, KOF Swiss Economic Institute
• (where): Zurich
• (when): 2014

Further information

• DOI: doi:10.3929/ethz-a-010200330
• Handle: http://hdl.handle.net/10419/102980
• Last update: 10.03.2025, 11:41 AM CET