Question

I would like to know some good sources to look up to find answers on what fiscal policies have been carried out in the past 2 years, and whether it was pro or counter cyclical.

Answer 1

Ans: We can talk about Procyclical and countercyclical variables,they are variables that change in a way that is positively or negatively agree with the changes in gross domestic product (GDP).

And this idea is often faced with context of a government's reach towards the spending and taxation. A 'procyclical fiscal policy' can be sum up simply as governments selection to increase government spending and reduce taxes during an economic growth, but reduce spending and increase taxes during a economic decline. But 'countercyclical' fiscal policy takes the opposite approach: reducing spending and increasing taxes during a growth period, and increasing spending and cutting taxes during a economic decline.

Now we are looking for fiscal policies that have been carried out in the past 2 years, and and also shows that ,whether it was pro or counter cyclical.

---- Procyclical has a very different understandings in the condition of economic policy. so it mention to any side of economic policy that could lncrease economic or financial changes, since the effects of particular policies are often unknown, a policy will be often procyclical, counter cyclical are according to the view of the one consider it.

And therefore the financial control of the Basel II Accord have been criticized for their possible procyclicality. The Accord want banks to increase their capital ratios when they face more risks. And unfortunately, this may need them to give less during economic decline, and which could put out the downturn. A similar criticism has been directed at fair value accounting rules. The effect of the single Eurozone interest rate on the relatively high-inflation countries in the Eurozone periphery is also pro-cyclical, leading to very low or even negative real interest rates during an Increase which magnifies the economic growth (e.g. 'Celtic Tiger' upturn in Ireland) and goods and profit cost bubbles whose subsequent bust magnifies its decrease.

---- And again, an economic or financial policy is called countercyclical, when it works against the cyclical inclination in the economy. That is, countercyclical policies are the ones that cool off the economy when it is in an increase stage, and the economy restore when it is in a decresing stage.

And if we consider an example of an automatically countercyclical fiscal policy, it is progressive taxation. By taxing a larger proportion of income when the economy enlarge, an increasing tax tends to decrease demand when the economy is Increasing, and thus limit in the economic lncrease. And other sections of economic thought, such as new classical macroeconomics, hold that countercyclical policies and they may be counterproductive, and therefore they support a laissez-faire fiscal policy as a good method for controlling an overall powerful economy. When the government adopts a countercyclical fiscal policy in response to a threat of economic decline the government may increase its fundamental pay out.