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The B.E. Journal of Macroeconomics

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Fiscal counter-cyclicality and productive investment: evidence from advanced economies

Davide Furceri
  • International Monetary Fund, Research Department, 700 19th Street NW, Washington, DC 20431, USA
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
/ João Tovar JallesORCID iD: http://orcid.org/0000-0002-7171-5076
Published Online: 2018-09-28 | DOI: https://doi.org/10.1515/bejm-2017-0222


We use a difference-in-difference approach to 25 industries for 18 advanced economies over the period 1985–2012 to examine the effect of fiscal counter-cyclicality on productive investment: (i) Research and Development (R&D), and (ii) Information and Communications Technology (ICT). The results show that fiscal counter-cyclicality increases R&D expenditure and the share of ICT capital in industries that are more financially constrained. Moreover, the effect is larger during recessions – when financing constraints are more likely to be binding – than during economic expansions. Our statistical method mitigates concerns about omitted variable bias and reverse causality. In addition, the results are robust to different measures of fiscal counter-cyclicality and to the inclusion of several controls.

Keywords: financial dependence; fiscal counter-cyclicality; industry-level data; recessions vs. expansions; time varying coefficients

JEL Classification: E62; H50; H60


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Published Online: 2018-09-28

Citation Information: The B.E. Journal of Macroeconomics, 20170222, ISSN (Online) 1935-1690, DOI: https://doi.org/10.1515/bejm-2017-0222.

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