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Linking Investment and Fiscal Policies

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  • António Afonso
  • João Tovar Jalles

Abstract

We assess the relevance of budgetary components for private and public investment using data for a panel of 95 countries for the period 1970-2008, and accounting for the usually encountered econometric pitfalls. Our results show a positive effect attributed to total government expenditures and to public investment in fostering private investment, and negative effects of government expenditure on wages and government consumption spending on private investment. Interest payments and subsidies have a negative effect on both types of investment (particularly in the emerging economies sub-group). Social security spending has a negative effect on private investment for the full and OECD samples, whereas government health spending has a positive and significant impact on private investment.

Suggested Citation

  • António Afonso & João Tovar Jalles, 2011. "Linking Investment and Fiscal Policies," Working Papers Department of Economics 2011/16, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp162011
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    Cited by:

    1. Afonso, António & Jalles, João Tovar, 2013. "Growth and productivity: The role of government debt," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 384-407.
    2. Nusrat Akber & Megha Gupta & Kirtti Ranjan Paltasingh, 2020. "The Crowding-in/ out Debate in Investments in India: Fresh Evidence from NARDL Application," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(2), pages 167-189, December.

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    More about this item

    Keywords

    budgetary decomposition; panel analysis; causality; non-linearities; fiscal-rules Classification-C23; E62; H50;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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