Fiscal policy and growth: do financial crises make a difference?
AbstractIn this paper we assess to what extent in the existence of a financial crisis, government spending can contribute to mitigate economic downturns in the short run and whether such impact differs in crisis and non crisis times. We use panel analysis for a set of OECD and non-OECD countries for the period 1981-2007. The fiscal multiplier for the full sample for instrumented regular and crisis spending is about 0.6-0.8 considering the sample average government spending share of GDP of about one third. Altogether, we cannot reject the hypothesis that crisis spending and regular spending have the same impact using a variation of controls, sub-samples and specifications. JEL Classification: C23, E62, E44, F43, H50
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Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 1217.
Date of creation: Jun 2010
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Other versions of this item:
- António Afonso & Hans Peter Grüner & Christina Kolerus, 2010. "Fiscal Policy and Growth: Do Financial Crises make a Difference?," Working Papers Department of Economics 2010/10, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-03 (All new papers)
- NEP-CBA-2010-07-03 (Central Banking)
- NEP-EEC-2010-07-03 (European Economics)
- NEP-MAC-2010-07-03 (Macroeconomics)
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