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The Cyclical and Long-Term Behavior of Government Expenditures in Developing Countries

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  • Gabriela Inchauste
  • Bernardin Akitoby
  • Benedict J. Clements
  • Sanjeev Gupta

Abstract

We examine the short- and long-term movements of government spending relative to output in 51 countries. We find that in the short term, the main components of government spending increase with output in about half of the sample countries, with some variation across spending categories and countries. Further, we find that there is a long-term relationship between government spending and output (in line with "Wagner''s law") for the majority of countries for at least one spending aggregate. In the short term, we find that power dispersion and government size typically dampen the positive response of government spending to output. Output volatility and financial risk, on the other hand, contribute to the procylicality of government spending.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/202.

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Length: 24
Date of creation: 01 Oct 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/202

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Keywords: Developing countries; Government expenditures; government spending; fiscal policy; public spending; business cycles; public finance; capital expenditure; fiscal performance; fiscal policies; foreign debt; spending cuts; government expenditure; tax rates; government purchases; fiscal deficits; fiscal responsibility; investment spending; fiscal data; tax revenues; national income; fiscal revenues; consumption smoothing; fiscal responsibility laws; fiscal institutions; fiscal rules; fiscal outcomes; discretionary fiscal policy; fiscal variables; fiscal adjustment; fiscal reforms; fiscal balances; tax base; government consumption expenditure; debt service; fiscal affairs department; consumption component; fiscal affairs; public debt; tax increases; budget surplus; consumption expenditure; fiscal aggregates; tax collections;

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Citations

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Cited by:
  1. Ugo Panizza & Dany Jaimovich, 2007. "Prociclicalidad o Causalidad Reversa?," Research Department Publications 4509, Inter-American Development Bank, Research Department.
  2. Paolo Manasse & Ugo Panizza & Laura Dos Reis, 2007. "Targeting the Structural Balance ," IDB Publications 6722, Inter-American Development Bank.
  3. Agnello, Luca & Sousa, Ricardo M., 2009. "The determinants of public deficit volatility," Working Paper Series 1042, European Central Bank.
  4. Panadés Martí Judith, 2009. "Tax Evasion, Technology Shocks and the Cyclicality of Government Revenues," Working Papers 201055, Fundacion BBVA / BBVA Foundation.
  5. Ugo Panizza & Dany Jaimovich, 2007. "Procyclicality or Reverse Causality?," Research Department Publications 4508, Inter-American Development Bank, Research Department.
  6. Brahima Coulibaly, 2012. "Monetary policy in emerging market economies: what lessons from the global financial crisis?," International Finance Discussion Papers 1042, Board of Governors of the Federal Reserve System (U.S.).
  7. International Monetary Fund, 2011. "The Cyclicality of Fiscal Policies in the CEMAC Region," IMF Working Papers 11/205, International Monetary Fund.
  8. Vratislav Izák, 2011. "The Welfare State and Economic Growth," Prague Economic Papers, University of Economics, Prague, vol. 2011(4), pages 291-308.
  9. Strawczynski, Michel, 2013. "Cyclicality of statutory tax rates," MPRA Paper 48821, University Library of Munich, Germany.
  10. Donal McGettigan & Kenji Moriyama & Jean F Noah Ndela Ntsama & Francois Painchaud & Haonan Qu & Chad Steinberg, 2013. "Monetary Policy in Emerging Markets," IMF Working Papers 13/96, International Monetary Fund.
  11. Strawczynski, Michel & Zeira, Joseph, 2009. "Cyclicality of Fiscal Policy: Permanent and Transitory Shocks," CEPR Discussion Papers 7271, C.E.P.R. Discussion Papers.
  12. Michel Strawczynski & Joseph Zeira, 2011. "Procyclicality of Fiscal Policy in Emerging Countries: the Cycle is the Trend," Working Papers Central Bank of Chile 624, Central Bank of Chile.

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