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Fiscal policy and private consumption in industrial and developing countries

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  • Schclarek, Alfredo

Abstract

This paper empirically studies the effects of fiscal policy shocks on private consumption. Further, it tries to determine if the initial conditions of the economy, such as the financing needs of the government or previous fiscal deficits, affect that relationship. We use yearly data between 1970 and 2000 for forty countries, of which 19 are industrialized and 21 are developing countries. In general, the estimation results seem to indicate that government consumption shocks have Keynesian effects for both industrial and developing countries. In the case of tax shocks, the evidence is mixed. Furthermore, there is no evidence that favor the hypothesis of expansionary fiscal consolidations.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 29 (2007)
Issue (Month): 4 (December)
Pages: 912-939

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Handle: RePEc:eee:jmacro:v:29:y:2007:i:4:p:912-939

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Web page: http://www.elsevier.com/locate/inca/622617

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References

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  1. repec:taf:emetrv:v:10:y:1991:i:2:p:235-252 is not listed on IDEAS
  2. Francesco Giavazzi & Marco Pagano, 1996. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," NBER Working Papers 5332, National Bureau of Economic Research, Inc.
  3. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
  4. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of two Small Euopean Countries," Working Papers 89, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Mcleer, M. & Mckenzie, C.R., 1989. "When Are Two Step Estimators Efficient?," Papers 179, Australian National University - Department of Economics.
  6. repec:taf:applec:v:26:y:1994:i:6:p:635-40 is not listed on IDEAS
  7. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
  8. Francesco Giavazzi & Tullio Jappelli & Marco Pagano, 2000. "Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries," NBER Working Papers 7460, National Bureau of Economic Research, Inc.
  9. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
  10. Glick, Reuven & Hutchison, Michael, 1990. "New Results in Support of the Fiscal Policy Ineffectiveness Proposition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(3), pages 288-304, August.
  11. Hjelm, Goran, 2002. " Effects of Fiscal Contractions: The Importance of Preceding Exchange Rate Movements," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(3), pages 423-41, September.
  12. van Aarle, Bas & Garretsen, Harry, 2003. "Keynesian, non-Keynesian or no effects of fiscal policy changes? The EMU case," Journal of Macroeconomics, Elsevier, vol. 25(2), pages 213-240, June.
  13. Hjelm, Goran, 2002. "Is private consumption growth higher (lower) during periods of fiscal contractions (expansions)?," Journal of Macroeconomics, Elsevier, vol. 24(1), pages 17-39, March.
  14. Jönsson, Kristian, 2004. "Fiscal Policy Regimes and Household Consumption," Working Papers 2004:12, Lund University, Department of Economics.
  15. Jean-Claude Chouraqui & Robert P. Hagemann & Nicola Sartor, 1990. "Indicators of Fiscal Policy: A Re-Examination," OECD Economics Department Working Papers 78, OECD Publishing.
  16. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
  17. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1399-1436, November.
  18. Paul van den Noord, 2000. "The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond," OECD Economics Department Working Papers 230, OECD Publishing.
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Citations

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Cited by:
  1. Catherine Mathieu & Jérôme Creel & Henri Sterdyniak & Bruno Ducoudre, 2005. "Doit-on oublier la politique budgétaire? Une analyse critique de la nouvelle théorie anti-keynésienne des finances publiques," Sciences Po publications info:hdl:2441/1769, Sciences Po.
  2. Carmignani, Fabrizio, 2008. "The impact of fiscal policy on private consumption and social outcomes in Europe and the CIS," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 575-598, March.
  3. Bikai, Landry, 2010. "Les Effets Non Lineaires Des Deficits Budgetaires Sur L´Activite Economique En Cemac
    [Threshold Effects of Budgetary Policy on Economic Growth in Cemac]
    ," MPRA Paper 24524, University Library of Munich, Germany.
  4. Carine Bouthevillain & John Caruana & Cristina Checherita & Jorge Cunha & Esther Gordo & Stephan Haroutunian & Amela Hubic & Geert Langenus & Bernhard Manzke & Javier J. Pérez & Pietro Tommasino, 2009. "Pros and Cons of various fiscal measures to stimulate the economy," BCL working papers 40, Central Bank of Luxembourg.
  5. Fabrizio Carmignani, . "Cyclical fiscal policy in developing countries: the case of Africa," MRG Discussion Paper Series 2408, School of Economics, University of Queensland, Australia.
  6. Robert J. Utz, 2007. "Sustaining and Sharing Economic Growth in Tanzania : Contents of CD Rom," World Bank Publications, The World Bank, number 6894, October.
  7. World Bank, 2007. "Tanzania - Sustaining and Sharing Economic Growth : Country Economic Memorandum and Poverty Assessment, Volume 1. Main Report," World Bank Other Operational Studies 7703, The World Bank.
  8. Alfredo Schclarek, 2004. "Consumption and Keynesian Fiscal Policy," CESifo Working Paper Series 1310, CESifo Group Munich.

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