The Impact of Government Debt on Private Consumption in OECD Countries
AbstractUsing data for 17 OECD countries from 1983 to 2003, this paper establishes a non-linear relationship between private consumption and the level of government debt. In countries with a high level of government debt, a fiscal expansion is partly crowded out by a fall in private consumption. In contrast, in low debt countries, private consumption is insensitive to changes in government debt. This means that fiscal policy will be less effective in stabilising business cycle fluctuations at higher levels of government debt.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 045.
Date of creation: Jun 2005
Date of revision:
consumption; government debt; panel data;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-19 (All new papers)
- NEP-EEC-2005-06-19 (European Economics)
- NEP-MAC-2005-06-19 (Macroeconomics)
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