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Has the Golden Rule of Public Finance Made a Difference in the UK ?

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Author Info
Jerome Creel () (Observatoire Français des Conjonctures Économiques)
Paola Monperrus-Veroni (Observatoire Français des Conjonctures Économiques)
Francesco Saraceno () (Observatoire Français des Conjonctures Économiques)

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Abstract

This paper uses the SVAR methodology to investigate the effects of public investment on growth, and more specifically, the effects of the introduction of a golden rule of public finance. We extend the existing literature by estimating a model of the British economy that takes into account long run factors such as public debt accumulation. We find that in such a long run framework, public investment has a significant and permanently positive effect on GDP growth; this result runs counter to the most recent literature on the topic that was limited to a short run specification. We further find, by comparing different subsamples, that the introduction of the golden rule in 1997 strengthened the positive effect of public investment.

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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2007-13.

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Date of creation: 2007
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Handle: RePEc:fce:doctra:0713

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Related research
Keywords: fiscal policy; golden rule of public finance; Structural VAR; Public Investment; UK Economy;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Frédéric Marty, 2007. "Partenariats public-privé, règles de discipline budgétaire, comptabilité patrimoniale et stratégies de hors bilan," Documents de Travail de l'OFCE 2007-29, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
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