AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
The Macroeconomic Effects of Fiscal Policy Uncertainty around the World
AEA Papers and Proceedings
(pp. 182–87)
Abstract
How adverse is the impact of fiscal policy uncertainty on economic and financial variables? To answer this question, we construct a novel cross-country database of news-based fiscal policy uncertainty indicators. Importantly, we track fiscal events that attract global attention, which we refer to as "global" fiscal policy uncertainty. We find that heightened fiscal policy uncertainty triggers contractionary effects, lowering industrial production in both advanced and emerging market economies. It also raises sovereign borrowing costs, generates synchronous movements in global financial variables including risk aversion, and strengthens the US dollar, even after accounting for US monetary policy shocks.Citation
Hong, Gee Hee, Shikun (Barry) Ke, and Anh Dinh Minh Nguyen. 2025. "The Macroeconomic Effects of Fiscal Policy Uncertainty around the World." AEA Papers and Proceedings 115: 182–87. DOI: 10.1257/pandp.20251011Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- E52 Monetary Policy
- E62 Fiscal Policy
- H63 National Debt; Debt Management; Sovereign Debt