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The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD Countries

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  • Norman Gemmell
  • Richard Kneller
  • Ismael Sanz

Abstract

The literatures testing for aggregate short-run or long‐run growth impacts of fiscal policy use quite different methodologies. The former generally focuses on temporary fiscal ‘shocks’; the latter typically have no short‐run dynamics or assume homogeneity. We use regression methods that treat heterogeneous short‐run dynamics explicitly within a long‐run model. Results suggest that previously estimated ‘long‐run’ growth effects of fiscal policy are typically achieved quickly, consistent with results from short‐run models. In principle these short‐run effects ‘persist’; in practice regular fiscal policy changes in OECD countries mean that persistent increases or decreases in growth rates are rare.

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File URL: http://hdl.handle.net/10.1111/j.1468-0297.2010.02414.x
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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 121 (2011)
Issue (Month): 550 (February)
Pages: F33-F58

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Handle: RePEc:ecj:econjl:v:121:y:2011:i:550:p:f33-f58

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Citations

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Cited by:
  1. Norman Gemmell & Joey Au, 2013. "Do Smaller Governments Raise the Level or Growth of Output? A Review of Recent Evidence," Review of Economics, Lucius & Lucius, vol. 64(2), pages 85-116.
  2. Robert A Buckle & Amy A Cruickshank, 2013. "The Requirements for Long-Run Fiscal Sustainability," Treasury Working Paper Series 13/20, New Zealand Treasury.
  3. A. Minniti & F. Venturini, 2014. "R&D Policy and Schumpeterian Growth: Theory and Evidence," Working Papers wp945, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. Sina T. Ates & Felipe E. Saffie, 2013. "Project Heterogeneity and Growth: The Impact of Selection," PIER Working Paper Archive 13-011, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  5. Eleftherios Goulas & Athina Zervoyianni, 2013. "Growth, Deficits and Uncertainty: Theoretical Aspects and Empirical Evidence," Working Paper Series 53_13, The Rimini Centre for Economic Analysis.
  6. Agnello, Luca & Castro, Vítor & Sousa, Ricardo M., 2012. "How does fiscal policy react to wealth composition and asset prices?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 874-890.
  7. Santiago Acosta Ormaechea & Atsuyoshi Morozumi, 2013. "Can a Government Enhance Long-Run Growth by Changing the Composition of Public Expenditure?," IMF Working Papers 13/162, International Monetary Fund.
  8. Teles, Vladimir Kuhl & Mussolini, Caio César, 2011. "Public debt and the limits of fiscal policy to increase economic growth," Textos para discussão 304, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  9. Bandyopadhyay, Debasis & Barro, Robert & Couchman, Jeremy & Gemmell, Norman & Liao, Gordon & McAlister, Fiona, 2012. "Average Marginal Income Tax Rates in New Zealand, 1907-2009," Working Paper Series 2423, Victoria University of Wellington, Chair in Public Finance.
  10. Santiago Acosta Ormaechea & Jiae Yoo, 2012. "Tax Composition and Growth," IMF Working Papers 12/257, International Monetary Fund.
  11. Becker, Sascha O. & Egger, Peter & von Ehrlich, Maximilian, 2011. "Absorptive Capacity and the Growth Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatment Effects," CEPR Discussion Papers 8474, C.E.P.R. Discussion Papers.
  12. repec:cge:warwcg:88 is not listed on IDEAS
  13. Goulas, Eleftherios & Zervoyianni, Athina, 2013. "Growth, deficits and uncertainty: Theoretical aspects and empirical evidence from a panel of 27 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 380-392.
  14. Roel Beetsma & Massimo Giuliodori, 2010. "Discretionary Fiscal Policy: Review and Estimates for the EU," CESifo Working Paper Series 2948, CESifo Group Munich.
  15. Heylen Freddy & Van de Kerckhove Renaat, 2013. "Employment by age, education, and economic growth: effects of fiscal policy composition in general equilibrium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 55, October.
  16. Gemmell, Norman & Kneller, Richard & Sanz, Ismael, 2013. "The Growth Effects of Tax Rates in the OECD," Working Paper Series 2706, Victoria University of Wellington, Chair in Public Finance.
  17. Eleftherios Goulas & Athina Zervoyianni, 2013. "The Growth-Crime Relationship: Are There any Asymmetries?," Working Paper Series 54_13, The Rimini Centre for Economic Analysis.
  18. Fiona McAlister & Debasis Bandyopadhyay & Robert Barro & Jeremy Couchman & Norman Gemmell & Gordon Liao, 2012. "Average Marginal Income Tax Rates for New Zealand, 1907-2009," Treasury Working Paper Series 12/04, New Zealand Treasury.
  19. Roel Beetsma & Massimo Giuliodori, 2011. "The Effects of Government Purchases Shocks: Review and Estimates for the EU," Economic Journal, Royal Economic Society, vol. 121(550), pages F4-F32, February.
  20. Athanasios O. Tagkalakis, 2013. "Discretionary fiscal policy and economic activity in Greece," Working Papers 169, Bank of Greece.
  21. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.

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