Fiscal policy under constraints : fiscal capacity and the (in-)stability of government financing during the Great Depression
Title: Fiscal policy under constraints : fiscal capacity and the (in-)stability of government financing during the Great Depression
Author: PAPADIA, Andrea
Series/Number: EUI MWP; 2018/06
The Great Depression, and the interwar period more generally, werecharacterized by macroeconomic mismanagement. Fiscal policy, in particular, was essentially not used to fight theslump. Despite this, I find that a higher degree of fiscal capacity helped countries reduce thecyclical volatility of their governments' financing and, thus, to run stabilizing - or, at least, less destabilizing - fiscal policies. This smoothing effect worked principally by facilitating countries' access to borrowing. Thus, interwar governments were constrained in their policychoices by past investments in their fiscal systems, and not just Gold Standard membership and ideology, as commonly held in the literature.
Subject: N10; N40; E62; H63; Great Depression; Fiscal policy; Fiscal capacity
Type of Access: openAccess