Economic and political drivers of fiscal response to COVID-19: empirical approach

Abstract What do we know about fiscal response to the COVID-19 pandemic in its early phases? Does the government’s ideology matter for the scope of anti-crisis measures? There is a growing literature and public debate on the economic and social implications of COVID-19. However, we still know little about the drivers of particular reactions of governments to this extraordinary shock. In this paper, we apply econometric tools to analyze the relevance of government ideology regarding economic policies for anti-crisis fiscal packages enacted in 2020. The results imply that right-wing governments provide significantly bigger fiscal packages than those observed in countries ruled by other political parties. Different responses to the crisis are also noted for the wealthy and the Nordic countries.