Fiscal Rules in Recessions: Evidence from the American States

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

This study explores the impact of balanced-budget rules on states’ fiscal policy outcomes and tests whether this impact depends on the political and economic environments in light of the American states’ experience from 2004 to 2010. The findings suggest that (1) budget rules are more binding in recessions as compared with “normal” times; (2) the impact of the rule depends on the political environment, especially on the party identity of the governor; (3) a divided government influences the rule’s impact, particularly when one party controls the governorship and another controls the legislature; and (4) states’ responses, as measured by total budget cuts, to unexpected revenue shocks (such as unexpected decreases in tax revenue) tend to be larger than states’ responses to unexpected expenditure shocks.

Original languageEnglish
Pages (from-to)505-528
Number of pages24
JournalPublic Finance Review
Volume43
Issue number4
DOIs
Publication statusPublished - 2015 Jan 1

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recession
budget
evidence
tax revenue
fiscal policy
revenue
expenditures
Recession
Fiscal rules
economics
experience
Political environment

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics
  • Public Administration

Cite this

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Fiscal Rules in Recessions : Evidence from the American States. / Hong, Sounman.

In: Public Finance Review, Vol. 43, No. 4, 01.01.2015, p. 505-528.

Research output: Contribution to journalArticle

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