With a permanently pro-cyclical fiscal policy, we could lose democracy and monetary policy
<p><span lang="EN-US">This article shows that if, in a young democracy with weak institutions, one and the same party governs in virtually all upswings of the business cycle and promotes each time pro-cyclical fiscal policies, three serious negative effects emerge. The first is t...
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| Format: | Article |
| Language: | English |
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Babes-Bolyai University, Cluj-Napoca
2018-06-01
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| Series: | Transylvanian Review of Administrative Sciences |
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| Online Access: | https://rtsa.ro/tras/index.php/tras/article/view/557 |
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| author | Lucian CROITORU |
| author_facet | Lucian CROITORU |
| author_sort | Lucian CROITORU |
| collection | DOAJ |
| description | <p><span lang="EN-US">This article shows that if, in a young democracy with weak institutions, one and the same party governs in virtually all upswings of the business cycle and promotes each time pro-cyclical fiscal policies, three serious negative effects emerge. The first is the loss of fiscal policy; fiscal policy remains pro-cyclical during the downturn as well, deepening the recession and extending the period in which output stays below potential. The second effect is the loss of democracy; unable to use fiscal policy to help exit the recession and speed up economic growth, the parties governing during downturns compounded by the pro-cyclicality of fiscal policies are perceived by the public as impotent and are penalized accordingly through a lower share of parliamentary seats, until the party that governs exclusively during business cycle upturns finds itself without a real opposition. The third effect is the loss of conventional monetary policy, manifesting if interest rates and inflation are low when recession sets in. Under these circumstances, lowering the monetary policy rate to zero might no longer suffice to stimulate the exit from recession and the quick return of output to its potential level, leaving central banks no option but to resort to unconventional monetary policies, such as quantitative easing.</span></p> |
| format | Article |
| id | doaj-art-63d82788a96d459285343028e0140b3d |
| institution | Matheson Library |
| issn | 1842-2845 |
| language | English |
| publishDate | 2018-06-01 |
| publisher | Babes-Bolyai University, Cluj-Napoca |
| record_format | Article |
| series | Transylvanian Review of Administrative Sciences |
| spelling | doaj-art-63d82788a96d459285343028e0140b3d2025-07-03T07:31:33ZengBabes-Bolyai University, Cluj-NapocaTransylvanian Review of Administrative Sciences1842-28452018-06-011454223710.24193/tras.54E.2574With a permanently pro-cyclical fiscal policy, we could lose democracy and monetary policyLucian CROITORU0National Bank of Romania, Bucharest, Romania<p><span lang="EN-US">This article shows that if, in a young democracy with weak institutions, one and the same party governs in virtually all upswings of the business cycle and promotes each time pro-cyclical fiscal policies, three serious negative effects emerge. The first is the loss of fiscal policy; fiscal policy remains pro-cyclical during the downturn as well, deepening the recession and extending the period in which output stays below potential. The second effect is the loss of democracy; unable to use fiscal policy to help exit the recession and speed up economic growth, the parties governing during downturns compounded by the pro-cyclicality of fiscal policies are perceived by the public as impotent and are penalized accordingly through a lower share of parliamentary seats, until the party that governs exclusively during business cycle upturns finds itself without a real opposition. The third effect is the loss of conventional monetary policy, manifesting if interest rates and inflation are low when recession sets in. Under these circumstances, lowering the monetary policy rate to zero might no longer suffice to stimulate the exit from recession and the quick return of output to its potential level, leaving central banks no option but to resort to unconventional monetary policies, such as quantitative easing.</span></p>https://rtsa.ro/tras/index.php/tras/article/view/557fiscal cynicismbusiness cyclepro-cyclical fiscal policymonetary policydemocracypolitical parties. |
| spellingShingle | Lucian CROITORU With a permanently pro-cyclical fiscal policy, we could lose democracy and monetary policy Transylvanian Review of Administrative Sciences fiscal cynicism business cycle pro-cyclical fiscal policy monetary policy democracy political parties. |
| title | With a permanently pro-cyclical fiscal policy, we could lose democracy and monetary policy |
| title_full | With a permanently pro-cyclical fiscal policy, we could lose democracy and monetary policy |
| title_fullStr | With a permanently pro-cyclical fiscal policy, we could lose democracy and monetary policy |
| title_full_unstemmed | With a permanently pro-cyclical fiscal policy, we could lose democracy and monetary policy |
| title_short | With a permanently pro-cyclical fiscal policy, we could lose democracy and monetary policy |
| title_sort | with a permanently pro cyclical fiscal policy we could lose democracy and monetary policy |
| topic | fiscal cynicism business cycle pro-cyclical fiscal policy monetary policy democracy political parties. |
| url | https://rtsa.ro/tras/index.php/tras/article/view/557 |
| work_keys_str_mv | AT luciancroitoru withapermanentlyprocyclicalfiscalpolicywecouldlosedemocracyandmonetarypolicy |