{"title":"Do fiscal rules shape private-sector investment decisions?","authors":"Rayangnewendé Frans Sawadogo","doi":"10.1016/j.jmacro.2024.103617","DOIUrl":null,"url":null,"abstract":"<div><p>We investigate whether fiscal rules impact private domestic investment. Using data spanning 100 advanced and developing countries over the period 1990–2019 and applying the entropy balancing method, we reveal that implementing fiscal rules significantly improves private-sector investment. This finding is robust to a wide set of economic and econometric tests. Moreover, we perform a range of heterogeneity tests and find that the effect of fiscal rules only applies in developing countries and is amplified in good times and in countries with a strong fiscal stance. However, the benefits of fiscal rules are mitigated in resource-rich countries and during economic crises. Finally, we explore the underlying mechanisms and show that fiscal discipline, a composition effect fostering public investment, and macroeconomic stability are three driving forces that produce the stimulative effect of fiscal rules.</p></div>","PeriodicalId":1,"journal":{"name":"Accounts of Chemical Research","volume":null,"pages":null},"PeriodicalIF":16.4000,"publicationDate":"2024-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Accounts of Chemical Research","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0164070424000326","RegionNum":1,"RegionCategory":"化学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"CHEMISTRY, MULTIDISCIPLINARY","Score":null,"Total":0}
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Abstract
We investigate whether fiscal rules impact private domestic investment. Using data spanning 100 advanced and developing countries over the period 1990–2019 and applying the entropy balancing method, we reveal that implementing fiscal rules significantly improves private-sector investment. This finding is robust to a wide set of economic and econometric tests. Moreover, we perform a range of heterogeneity tests and find that the effect of fiscal rules only applies in developing countries and is amplified in good times and in countries with a strong fiscal stance. However, the benefits of fiscal rules are mitigated in resource-rich countries and during economic crises. Finally, we explore the underlying mechanisms and show that fiscal discipline, a composition effect fostering public investment, and macroeconomic stability are three driving forces that produce the stimulative effect of fiscal rules.
期刊介绍：
Accounts of Chemical Research presents short, concise and critical articles offering easy-to-read overviews of basic research and applications in all areas of chemistry and biochemistry. These short reviews focus on research from the author’s own laboratory and are designed to teach the reader about a research project. In addition, Accounts of Chemical Research publishes commentaries that give an informed opinion on a current research problem. Special Issues online are devoted to a single topic of unusual activity and significance.
Accounts of Chemical Research replaces the traditional article abstract with an article "Conspectus." These entries synopsize the research affording the reader a closer look at the content and significance of an article. Through this provision of a more detailed description of the article contents, the Conspectus enhances the article's discoverability by search engines and the exposure for the research.
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