Irish Fiscal Policy in Good Times and in Bad: Its Impact During Different Stages of the Economic Cycle

October 8, 2014 | QEC Special Article

Authors: David Cronin , Kieran McQuinn
Quarterly Economic Commentary , Autumn 2014

Recent international econometric analyses indicate that the impact of fiscal policy on output can vary during the economic cycle. In this paper, it is shown that a positive shock to government consumption will raise economic activity when the output gap is negative while the opposite holds when a positive output gap arises. Accordingly, the impact of fiscal policy at different stages of the economic cycle, should be borne in mind when formulating budgetary policy.

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