Government size and output volatility: is there a relationship?
AbstractThis paper provides some further tests for the proposition that a larger public sector leads to smaller out-put volatility. Both Gali and Fatas & Mihov have provided some evidence which appears to support this proposition. Their evidence is, however, based on a relatively small sample of countries. In this study, we go beyond the OECD sample and focus on a much larger World Bank data set covering up to 208 countries for the period 1960–2002. We also seek to utilise some time series aspects of the material by using pooled cross-section time series data. Tests with different models and measures clearly indicate that the original results are not very robust and the relationship between government size and output volatility is either nonexistent or very weak at best.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 8/2005.
Length: 28 pages
Date of creation: 11 May 2005
Date of revision:
government; fiscal policy; automatic stabilisers;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-21 (All new papers)
- NEP-ICT-2006-10-21 (Information & Communication Technologies)
- NEP-MAC-2006-10-21 (Macroeconomics)
- NEP-PBE-2006-10-21 (Public Economics)
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