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Fiscal Policy Regimes and Household Consumption

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  • Jönsson, Kristian

    ()
    (Sveriges Riksbank)

Abstract

In this paper, we study the effects of fiscal policy during different fiscal policy regimes. More specifically, we investigate how different factors, such as size, duration and composition of fiscal changes, can alter the effects of fiscal policy on private consumption. Using an unbalanced panel of 19 OECD countries during the period 1960-2000, we find that transfer changes are believed to be permanent during fiscal contractions. Hence, it is more likely that an expansionary fiscal contraction will occur if the government cuts transfers. Our results highlight the importance of accounting for specific circumstances, such as the debt and deficit position, when studying expansionary fiscal contractions. The results also indicate that expansionary fiscal contractions are likely to come at a considerable social cost.

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Bibliographic Info

Paper provided by Lund University, Department of Economics in its series Working Papers with number 2004:12.

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Length: 29 pages
Date of creation: 25 Mar 2004
Date of revision:
Handle: RePEc:hhs:lunewp:2004_012

Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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Keywords: Panel data; Household consumption; Fiscal policy; Non-Keynesian effects;

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References

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  1. Ardagna, Silvia & Alesina, Alberto, 1998. "Tales of Fiscal Adjustment," Scholarly Articles 2579822, Harvard University Department of Economics.
  2. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
  3. Francesco Giavazzi & Marco Pagano, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," NBER Working Papers 5332, National Bureau of Economic Research, Inc.
  4. Gobbin, Niko & van Aarle, Bas, 2001. " Fiscal Adjustments and Their Effects during the Transition to the EMU," Public Choice, Springer, Springer, vol. 109(3-4), pages 269-99, December.
  5. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2374, C.E.P.R. Discussion Papers.
  6. repec:fth:coluec:754 is not listed on IDEAS
  7. Giavazzi, Francesco & Pagano, Marco, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 417, C.E.P.R. Discussion Papers.
  8. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
  9. Alberto Alesina & Silvia Ardagna, 1998. "Tales of fiscal adjustment," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 13(27), pages 487-545, October.
  10. António Afonso, 2001. "Non-Keynesian Effects of Fiscal Policy in the EU-15," Working Papers Department of Economics, ISEG - School of Economics and Management, Department of Economics, University of Lisbon 2001/07, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  11. Alberto Alesina & Roberto Perotti, 1996. "Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects," NBER Working Papers 5730, National Bureau of Economic Research, Inc.
  12. Graham, Fred C, 1993. "Fiscal Policy and Aggregate Demand: Comment," American Economic Review, American Economic Association, vol. 83(3), pages 659-66, June.
  13. Alberto Alesina & Roberto Perotti, 1996. "Fiscal Adjustments in OECD Countries," IMF Working Papers 96/70, International Monetary Fund.
  14. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
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Cited by:
  1. Schclarek, Alfredo, 2007. "Fiscal policy and private consumption in industrial and developing countries," Journal of Macroeconomics, Elsevier, Elsevier, vol. 29(4), pages 912-939, December.
  2. Alfredo Schclarek, 2004. "Consumption and Keynesian Fiscal Policy," CESifo Working Paper Series 1310, CESifo Group Munich.

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