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August 18, 2025Open Access

Fiscal Reaction Function and Macroeconomic Shocks: Evidence from Developing Countries

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Authors

ETElwaleed Ahmed Talha

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Overview

Panel analysis shows how fiscal policy responds to public debt and macroeconomic shocks in developing nations, indicating the need for fiscal discipline.

Key Points

  • Fiscal balance typically increases with rising public debt, reflecting a countercyclical response in many countries.
  • Procyclical behavior is observed in fiscal policy during positive commodity and output shocks, complicating debt management.
  • Using a Panel Structural Vector Autoregression (PSVAR) framework, the study analyzes data from 142 developing countries over 24 years.
  • Evidence of fiscal fatigue at high debt levels highlights the risks of persistent deficits to long-term fiscal health.

Cite This Study

Elwaleed Ahmed Talha (2025) studied this question.

synapsesocial.com/papers/68af453fad7bf08b1ead2c15https://doi.org/10.21203/rs.3.rs-7378610/v1
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