Fiscal policy as a stabilizer of business cycle fluctuations: Real Business Cycle model and OECD empirical evidence over 1970–2005

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Aldona Zawojska
Magdalena Pisa

Abstract
This paper deals with the interaction between fiscal policy and the business cycle. It mainly focuses on the interaction between this policy and output fluctuations observed across OECD countries over the past thirty five years. The Hodrick-Prescott filter was employed to fi t a long-term trend in GDP to the raw data, and to derive the short-term cycles of each series. We achieved the following conclusion: the size of the government as measured by expenditures and taxes as a percentage of GDP is clearly inversely related to the volatility of GDP. Our results are not consistent with the RBC theory

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How to Cite
Zawojska, A., & Pisa, M. (2007). Fiscal policy as a stabilizer of business cycle fluctuations: Real Business Cycle model and OECD empirical evidence over 1970–2005. Zeszyty Naukowe SGGW - Ekonomika I Organizacja Gospodarki Żywnościowej, (63), 5–22. https://doi.org/10.22630/EIOGZ.2007.63.12
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