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Economic policy and output volatility in Spain, 1950–1998: Was fiscal policy destabilizing?

Battilossi, Stefano, Escario, Regina and Foreman-Peck, James S. ORCID: 2010. Economic policy and output volatility in Spain, 1950–1998: Was fiscal policy destabilizing? [Working Paper]. Cardiff Business School Working Papers, vol. 2010/5. Cardiff, UK: Cardiff Business School, Cardiff University. Available at:

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Was Spanish fiscal policy destabilizing? We estimate policy reaction functions and test the impact of fiscal shocks on growth volatility over the period 1950–1998. We find that a transition from pro-cyclical to countercyclical fiscal policy occurred in the late years of the Franco regime, contributing to the stabilization of the growth pattern. The timing of the shift, between the late 1960s and early 1970s, was not determined by a single policy change, but rather by gradual pressure from economic liberalization, the external constraint imposed by a fixed exchange rate regime and the modernization of fiscal policy instruments. The aggressiveness of fiscal shocks also decreased over time, thus contributing to the progressive stabilization of output growth. There appears to be little necessity to appeal to a ‘Great Moderation’ of monetary policy to understand the greater stability of the Spanish economy from the 1980s

Item Type: Monograph (Working Paper)
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Uncontrolled Keywords: Fiscal reaction function; Fiscal shocks; SVAR; Growth volatility; Economics
Publisher: Cardiff Business School, Cardiff University
Date of First Compliant Deposit: 30 March 2016
Last Modified: 20 Oct 2022 08:54

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