cover image: The Economic Impact of Fiscal Policy Uncertainty: Evidence from a New Cross-Country Database

20.500.12592/4zrvx6l

The Economic Impact of Fiscal Policy Uncertainty: Evidence from a New Cross-Country Database

27 Sep 2024

This working paper investigates how fiscal policy uncertainty (FPU) impacts the global economy. Fiscal policy uncertainty refers to ambiguity in government spending, tax policies, and public debt management, often resulting in economic and financial disruptions. The authors construct a novel database using news-based methodology to capture FPU across 189 countries. By analyzing news data from 1977 to 2024, they highlight significant fiscal events like the US debt ceiling crises and the UK mini-budget of 2022, which garnered global attention and caused substantial uncertainty. The study examines how global FPU affects economic activity, focusing on industrial production and financial conditions in advanced and emerging economies. The analysis reveals that global FPU is contractionary, leading to declines in industrial production and tightening financial conditions, especially in emerging markets. It also demonstrates that global FPU has a greater negative impact than country-specific FPU. The authors use a variety of models, including vector autoregressions (VAR), to analyze the propagation of FPU shocks globally and their amplification through financial markets, which has significant implications for policymakers worldwide.
growth fiscal policy media industrial production global global shocks fiscal policy uncertainty

Authors

Gee Hee Hong, Shikun (Barry) Ke, Anh D. M. Nguyen

Published in
United States of America

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