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Government Outlays, Economic Growth and Unemployment: A VAR Model

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  • Siyan Wang

    ()
    (Department of Economics,University of Delaware)

  • Burton A. Abrams

    ()
    (Department of Economics,University of Delaware)

Abstract

This paper examines the dynamic effects of government outlays on economic growth and the unemployment rate. Using vector autoregression and data from twenty OECD countries over three recent decades, we found: (1) positive shocks to government outlays slow down economic growth and raise the unemployment rate; (2) different types of government outlays have different effects on growth and unemployment, with transfers and subsidies having a larger effect than government purchases; (3) causality runs one-way from government outlays to economic growth and the unemployment rate; (4) the above results are not sensitive to how government outlays are financed.

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Bibliographic Info

Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 11-13.

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Length: 30 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:dlw:wpaper:11-13.

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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
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Keywords: government outlays; economic growth; unemployment rate; vector autoregression; Granger causality;

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References

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Cited by:
  1. Siyan Wang & Burton A. Abrams, 2011. "The Effect of Government Size on the Steady-State Unemployment Rate: A Dynamic Perspective," Working Papers 11-12, University of Delaware, Department of Economics.
  2. Burton A. Abrams & Siyan Wang, 2007. "The Effect of Government Size on the Steady-State Unemployment Rate: An Error Correction Model," Working Papers 07-14, University of Delaware, Department of Economics.

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