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Budget Deficits, Economic Freedom, and Economic Growth in OECD Nations: P2SLS Fixed-Effects Estimates, 2003-2008

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  • Cebula, Richard

Abstract

This study empirically investigates the impacts of central government budget deficits and economic freedom on per capita real economic growth in OECD nations over the period 2003–2008. Economic growth is measured by the percentage growth rate of purchasing-power-parity adjusted real per capita GDP. Within the context of the Fixed Effects Model, panel two stage least squares (P2SLS) estimations using a six-year panel dataset for 29 of the 30 the OECD member nations as of 2008 as a group reveal that economic growth is a decreasing function of higher central government budget deficits and an increasing function of economic freedom. It is suggested that governments can best promote real economic growth by limiting the size of their budget deficits (relative to GDP) and pursuing policies consistent with increasing various forms of economic freedom

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  • Cebula, Richard, 2011. "Budget Deficits, Economic Freedom, and Economic Growth in OECD Nations: P2SLS Fixed-Effects Estimates, 2003-2008," MPRA Paper 53203, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53203
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    More about this item

    Keywords

    economic growth; economic freedom; budget deficits;
    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
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights

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