THE BEHAVIOR OF FISCAL POLICY IN INDONESIA IN RESPONSE TO ECONOMIC CYCLES

A Abdurohman, Budy Resosudarmo

    Research output: Contribution to journalArticle

    Abstract

    The current general wisdom regarding fiscal policy in response to fluctuations in economic cycles is to adopt countercyclical strategies: contractive during a boom to avoid overheating the economy and expansive during a recession to stimulate economic activity. This paper attempts to investigate the practical behavior of fiscal policy in Indonesia in response to economic cycles to establish whether it follows general fiscal wisdom (countercyclical) or amplifies the cycle (procyclical). An error correction model (ECM) and an alternative model to deal with the possible endogeneity problem are utilized. This paper shows that fiscal policy in Indonesia tends to be procyclical. Observations of some other ASEAN countries, namely Malaysia, the Philippines, Singapore and Thailand, indicate that Singapore could be the only country in ASEAN that is able to implement a countercyclical fiscal policy
    Original languageEnglish
    Pages (from-to)377-401
    JournalSingapore Economic Review
    Volume62
    Issue number2
    DOIs
    Publication statusPublished - 2017

    Fingerprint

    Dive into the research topics of 'THE BEHAVIOR OF FISCAL POLICY IN INDONESIA IN RESPONSE TO ECONOMIC CYCLES'. Together they form a unique fingerprint.

    Cite this