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Procyclical Fiscal Policy

  • Develops a new and plausible explanation as to why and when governments should control the budget deficits procyclically

  • Empirically shows how democratic economies whose government functions weakly should adopt procyclical fiscal policies

  • Provides a worm-eye, in-country analysis of Japan and shows that procyclical analysis should be adopted in rural areas

  • Presents a comprehensive review of the recent discussion of fiscal cyclicality

Book

Part of the SpringerBriefs in Economics book series (BRIEFSECONOMICS)

Also part of the Development Bank of Japan Research Series book sub series (BRIEFSDBJRS)

Table of contents

  1. Front Matter
    Pages i-xiii
  2. Toshihiro Ihori, Keigo Kameda
    Pages 1-25
  3. Toshihiro Ihori, Keigo Kameda
    Pages 27-43
  4. Toshihiro Ihori, Keigo Kameda
    Pages 45-68

About this book

Introduction

Conventional wisdom dictates that a fiscal policy should be counter-cyclical. However, contrary to this conventional views, recent research has demonstrated that fiscal policy is actually procyclical in most developing countries. In this book, we attempt to propose a new interpretation of this procyclicality after reviewing theoretical and empirical evolution of the research. In particular, by incorporating the political effort behavior of private agents into a weak government model, we explore how income fluctuations affect the optimal budget deficits in a political economy. If the government can control the political behavior, normally, the optimal budget deficit should rise in a recession as a first-best case; however, interestingly, a recession does not necessarily prompt an increase in the budget deficits in a second-best political economy. The response of the budget deficits to income fluctuations mainly depends on the efficiency of political effort, which may correspond to the degree of democracy and bureaucratic efficiency of the governments. We test the prediction of the pro-cyclical fiscal policy and find it applicable for democratic countries with semi-efficient governments including Japan.

Keywords

fiscal policy procyclicality deficit ceiling fiscal privilege political effort income fluctuation

Authors and affiliations

  1. 1.National Graduate Institute for Policy StudiesMinato-kuJapan
  2. 2.Kwansei Gakuin UniversitySandaJapan

About the authors

Toshihiro Ihori is a special professor of economics at the National Gradual Institute for Policy Studies and a professor emeritus of The University of Tokyo. He is an Academic Advisor of the Research Institute of Capital Formation, Development Bank of Japan. He has a B.A. and a M.A. from The University of Tokyo and a Ph.D. in economics from Johns Hopkins University. His major field of research is public economics. Details are at the web site of the  National Gradual Institute for Policy Studies.

Keigo Kameda is a Professor of Economics at School of Policy Studies, Kwansei Gakuin University. His main areas of research are public finance and macroeconomic policies. Born in 1970, Prof. Kameda received a Bachelor’s degree in Economics at Keio University in 1993 and a Ph.D. in Economics at Keio University in 2014. He was appointed Professor of Economics at School of Policy Studies, Kwansei Gakuin University in 2015.

Bibliographic information

  • Book Title Procyclical Fiscal Policy
  • Authors Toshihiro Ihori
    Keigo Kameda
  • Series Title SpringerBriefs in Economics
  • Series Abbreviated Title SpringerBriefs in Economics
  • DOI https://doi.org/10.1007/978-981-13-2995-1
  • Copyright Information Development Bank of Japan 2018
  • Publisher Name Springer, Singapore
  • eBook Packages Economics and Finance Economics and Finance (R0)
  • Softcover ISBN 978-981-13-2994-4
  • eBook ISBN 978-981-13-2995-1
  • Series ISSN 2191-5504
  • Series E-ISSN 2191-5512
  • Edition Number 1
  • Number of Pages XIII, 68
  • Number of Illustrations 10 b/w illustrations, 9 illustrations in colour
  • Topics Public Economics
    Asian Economics
  • Buy this book on publisher's site
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