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Boom-Bust Phases in Asset Prices and Fiscal Policy Behavior
Author:
Ludger Schuknecht null

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Mr. Albert Jaeger
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Series:
IMF Working Papers
Volume/Issue:
Volume 2004: Issue 054
Language:
English
Publication Date:
01 Apr 2004
DOI:
https://doi.org/10.5089/9781451847543.001
ISBN:
9781451847543
ISSN:
1018-5941
Pages:
36
Keywords:
WP; asset price; output growth; real asset; boom or bust; Boom-bust cycles; fiscal policy; asset prices; cyclical adjustment; deficit bias; bust phase; asset price downturn; growth rate sequence; asset price swing; price downturn; identifying asset price swing; asset price boom; price change; Fiscal stance; Business cycles; Output gap; Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Boom and bust phases in asset prices have become a pervasive feature of macroeconomic developments in many advanced economies. This paper studies fiscal policy during boom-bust phases in asset prices and draws several conclusions. First, expansions and contractions in economic activity during such boom-bust phases tend to be highly persistent, cyclical turning points are harder to forecast, and the margins of error for output gap estimates can be large. Second, conventional estimates of revenue elasticities seem not to allow an accurate assessment of the fiscal stance and of the strength of underlying fiscal positions during boom-bust phases. And third, boom-bust phases tend to exacerbate already existing procyclical policy biases, as well as political-economy biases, toward higher spending and public debt ratios.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund