Cyclicality of Fiscal Policy in Israel
Israel Economic Review Vol. 7 No. 1, pp. 47-66, 2007
20 Pages Posted: 19 Aug 2012
There are 2 versions of this paper
Cyclicality of Fiscal Policy in Israel
Date Written: march 19, 2007
Abstract
This paper tests the cyclicality of fiscal policy in Israel. We find that deficits are mildly countercyclical, mainly in recessions. Expenditures, and in particular public investment, are procyclical. However, we find that both government deficit and expenditures have become more countercyclical after 1985, a period that is characterized by improved fiscal discipline, following the Stabilization Program. We interpret this result as evidence that Israel is nowadays in a transition from procyclical fiscal policy, as in many developing countries, to a countercyclical fiscal policy, as is more common in developed countries.
Keywords: cyclicality, fiscal policy, Israel
JEL Classification: E32, H30
Suggested Citation: Suggested Citation
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