01846cas a2200253 a 4500 AALejournalIMF007057 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455218004 1018-5941 BD-DhAAL BD-DhAAL Salman, Ferhan. Fiscal Policy During Absorption Cycles / Ferhan Salman, Gabriela Dobrescu. Washington, D.C. : International Monetary Fund, 2011. 1 online resource (32 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Domestic absorption cycles are relevant in assessment and design of fiscal policies. Our cross-country analysis covers 59 advanced and emerging countries for the 1990-2009 period. We show that ignoring domestic absorption cycles leads to biased fiscal stance indicators, for both advanced and emerging economies, by up to 1.5 percent of GDP. The estimates of fiscal policy reaction functions indicate that absorption booms are associated with pro-cyclical fiscal policy. We tackle the endogeneity problem in reactions functions through stripping the cyclical component of the fiscal aggregates. We also find that simple filtering methods in the computation of absorption gaps perform as better as indirect methods of estimating trade balance gaps and stripping of output gaps. Mode of access: Internet Dobrescu, Gabriela. IMF Working Papers; Working Paper ; No. 2011/041 Full text available on IMF http://elibrary.imf.org/view/journals/001/2011/041/001.2011.issue-041-en.xml IMF e-Library