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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.

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Bibliographic Info

Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2011/16.

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Date of creation: Aug 2011
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Handle: RePEc:ise:isegwp:wp162011

Contact details of provider:
Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

Related research

Keywords: budgetary decomposition; panel analysis; causality; non-linearities; fiscal-rules Classification-C23; E62; H50;

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