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Cyclical fiscal policy, credit constraints, and industry growth

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  • Philippe Aghion
  • David Hemous
  • Enisse Kharroubi

Abstract

This paper analyzes the impact of cyclical fiscal policy on industry growth. Using Rajan and Zingales' (1998) difference-in-difference methodology on a panel data sample of manufacturing industries across 15 OECD countries over the period 1980-2005, we show that industries with relatively heavier reliance on external finance or lower asset tangibility tend to grow faster (both in terms of value added and of labor productivity growth) in countries which implement more countercyclical fiscal policies.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 340.

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Length: 58 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:bis:biswps:340

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Keywords: growth; financial dependence; fiscal policy; countercyclicality;

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Cited by:
  1. Gianluigi Pelloni & Marco Savioli, 2014. "From Rags to Riches back to Rags? The Slow Economic Decline of a Successful Nation: Italy 1950–2013," Professional Reports 01_14, The Rimini Centre for Economic Analysis.
  2. Philippe Aghion, 2009. "Some Thoughts on Industrial Policy and Growth," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2009-09, Observatoire Francais des Conjonctures Economiques (OFCE).
  3. Ciccone, Antonio & Papaioannou, Elias, 2010. "Estimating Cross-Industry Cross-Country Models Using Benchmark Industry Characteristics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8056, C.E.P.R. Discussion Papers.
  4. Philippe Aghion & Emmanuel Farhi & Enisse Kharroubi, 2012. "Monetary Policy, Liquidity, and Growth," NBER Working Papers 18072, National Bureau of Economic Research, Inc.
  5. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.

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