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Fiscal response to the COVID‐19 crisis in advanced and emerging market economies †
Author(s) -
Alberola Enrique,
Arslan Yavuz,
Cheng Gong,
Moessner Richhild
Publication year - 2021
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12370
Subject(s) - fiscal space , economics , fiscal policy , fiscal union , covid-19 , pandemic , monetary economics , emerging markets , macroeconomics , medicine , disease , pathology , infectious disease (medical specialty)
The fiscal policy response to the COVID‐19 crisis was swift and strong, in tandem with monetary policy. Advanced economies (AEs) deployed a much larger fiscal response than emerging market economies (EMEs) throughout the pandemic. This study focuses on the drivers of this divergent fiscal response in the first months of the pandemic. Apart from the fact that EMEs entered the crisis later than AEs, narrower fiscal policy space in EMEs, further reduced by the tightening of their financing conditions in the early stages of the pandemic, constrained their fiscal response. The size and composition of the fiscal response also depended on some structural factors, such as the level of income, the strength of the social safety nets and automatic stabilisers.