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Cyclical Budgetary Policy and Economic Growth: What Do We Learn From OECD Panel Data?

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  • Aghion, Philippe
  • Marinescu, Ioana

Abstract

This paper uses yearly panel data on OECD countries to analyze the relationship between growth and the cyclicality of government debt. We develop new time-varying estimates of the cyclicality of public debt. Our main findings can be summarized as follows: (i) less procyclical public debt growth can have significantly positive effects on productivity growth, in particular when financial development is lower; (ii) public debt growth has become increasingly countercyclical in most OECD countries over the past twenty years, but this trend has been less pronounced in the EMU; (iii) less financially developed or more open economies display less countercyclical public debt growth.

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File URL: http://dash.harvard.edu/bitstream/handle/1/3350066/aghion_cyclicalbudgetary.pdf
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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3350066.

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Date of creation: 2007
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Publication status: Published in NBER Macroeconomics Annual
Handle: RePEc:hrv:faseco:3350066

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  1. Alberto Alesina & Guido Tabellini, 2005. "Why is fiscal policy often procyclical?," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 2090, Harvard - Institute of Economic Research.
  2. Easterly, William, 2005. "National Policies and Economic Growth: A Reappraisal," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 15, pages 1015-1059 Elsevier.
  3. Philip Lane & Aaron Tornell, 1998. "Why Aren't Savings Rates in Latin America Procyclical?," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1826, Harvard - Institute of Economic Research.
  4. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 18(37), pages 533-572, October.
  5. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles, Harvard University Department of Economics 3451400, Harvard University Department of Economics.
  6. Philippe Aghion & Philippe Bacchetta & Romain Ranciere & Kenneth Rogoff, 2006. "Exchange Rate Volatility and Productivity Growth: The Role of Financial Development," Working Papers, Swiss National Bank, Study Center Gerzensee 06.02, Swiss National Bank, Study Center Gerzensee.
  7. Alberto Alesina & Roberto Perotti, 1996. "Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects," NBER Working Papers, National Bureau of Economic Research, Inc 5730, National Bureau of Economic Research, Inc.
  8. Daron Acemoglu & Simon Johnson & James Robinson & Yunyong Thaicharoen, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," NBER Working Papers, National Bureau of Economic Research, Inc 9124, National Bureau of Economic Research, Inc.
  9. Klaus Schmidt-Hebbel & Cesar Calderon & Roberto Duncan, 2004. "The quality of institutions and cyclical properties of macroeconomic policies," Econometric Society 2004 Latin American Meetings, Econometric Society 350, Econometric Society.
  10. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers, National Bureau of Economic Research, Inc 11349, National Bureau of Economic Research, Inc.
  11. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers, OECD Publishing 152, OECD Publishing.
  12. Ernesto Talvi & Carlos A. Vegh, 2000. "Tax Base Variability and Procyclical Fiscal Policy," NBER Working Papers, National Bureau of Economic Research, Inc 7499, National Bureau of Economic Research, Inc.
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