Was Spanish fiscal policy destabilizing? We estimate policy reaction functions and test the impact of fiscal shocks on growth volatility over the period 19501998. We find that a transition from pro-cyclical to countercyclical fiscal policy occurred in the late years of the Franco regime,...

The Spanish Second Republic was a unique experiment of democratization in interwar Spain, which was characterized by extreme levels of political uncertainty. In response to this uncertainty, we find that investors sold stocks in favor of government bonds. In fact, political uncertainty had a...