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Searching for Non-Keynesian Effects of Fiscal Policy

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Author Info
Francesco Giavazzi () (IGIER, Università Bocconi, NBER and CEPR)
Tullio Jappelli () (CSEF, Università di Salerno, and CEPR)
Marco Pagano () (CSEF, Università di Salerno, and CEPR)

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Abstract

We search for the circumstances in which the response of national saving to fiscal policy contradicts conventional Keynesian predictions, using data from 18 OECD countries. The data suggest that non-Keynesian effects tend to be associated with large and persistent fiscal impulses. Such responses can be traced to changes in taxes and transfers more than to changes in government consumption and are stronger for fiscal contractions than expansions. During large contractions an increase in taxes has no effect on national saving. High or rapidly growing public debt is not a good predictor of non-Keynesian effects. Finally, the composition of the fiscal impulse matters: the non-Keynesian effects of a large fiscal contraction are amplified when this is carried out primarily by raising taxes.

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Publisher Info
Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 16.

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Date of creation: 01 Feb 1999
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Publication status: Published in European Economic Review, June 2000, vol. 44, pages 1259-1290
Handle: RePEc:sef:csefwp:16

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Related research
Keywords: Fiscal policy; national saving; contractionary fiscal expansions;

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Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Feldstein, Martin, 1982. "Government deficits and aggregate demand," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 1-20. [Downloadable!] (restricted)
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  2. Perotti, Roberto, 1996. "Fiscal Consolidation in Europe: Composition Matters," American Economic Review, American Economic Association, vol. 86(2), pages 105-10, May. [Downloadable!] (restricted)
  3. Christopher D. Carroll & David N. Weil, 1993. "Saving and Growth: A Reinterpretation," NBER Working Papers 4470, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Bertola, Giuseppe & Drazen, Allan, 1993. "Trigger Points and Budget Cuts: Explaining the Effects of Fiscal Austerity," American Economic Review, American Economic Association, vol. 83(1), pages 11-26, March. [Downloadable!] (restricted)
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  5. Alberto Alesina & Roberto Perotti, 1996. "Fiscal Adjustments in OECD Countries - Composition and Macroeconomic Effects," IMF Working Papers 96/70, International Monetary Fund.
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  6. Sutherland, Alan, 1997. "Fiscal crises and aggregate demand: can high public debt reverse the effects of fiscal policy?," Journal of Public Economics, Elsevier, vol. 65(2), pages 147-162, August. [Downloadable!] (restricted)
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  7. B. Douglas Bernheim, 1987. "Ricardian Equivalence: An Evaluation of Theory and Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 263-316 National Bureau of Economic Research, Inc. [Downloadable!]
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  8. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions be Expansionary? Tales of Two Small European Countries," NBER Working Papers 3372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Giavazzi, Francesco & Pagano, Marco, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," CEPR Discussion Papers 1284, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. repec:fth:coluec:754 is not listed on IDEAS
  11. Bayoumi, Tamim & Masson, Paul R & Samiei, Hossein, 1996. "International Evidence on the Determinants of Saving," CEPR Discussion Papers 1368, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Giuseppe Nicoletti, 1988. "Private Consumption, Inflation and the "Debt Neutrality Hypothesis": The Case of Eight OECD Countries," OECD Economics Department Working Papers 50, OECD, Economics Department. [Downloadable!]
  13. Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-90, March. [Downloadable!] (restricted)
  14. Alesina, A. & Perotti, R., 1995. "Fiscal Expansions and Adjustments in OECD Countries," Discussion Papers 1995_25, Columbia University, Department of Economics.
  15. C. John McDermott & Robert F. Westcott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Working Papers 96/59, International Monetary Fund.
  16. Jappelli, Tullio & Pagano, Marco, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 83-109, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Martin Feldstein, 2002. "Commentary : Is there a role for discretionary fiscal policy?," Proceedings, Federal Reserve Bank of Kansas City, pages 151-162. [Downloadable!]
  2. Maria Silgoner & Jesus Crespo Cuaresma & Gerhard Reitschuler, 2004. "The fiscal smile - on the effectiveness and limits of fiscal stabilizers," Money Macro and Finance (MMF) Research Group Conference 2003 87, Money Macro and Finance Research Group. [Downloadable!]
  3. Joerg Bibow, 2004. "Fiscal Consolidation Contrasting Strategies & Lessons from International Experience," Macroeconomics 0402014, EconWPA. [Downloadable!]
  4. Artis, Michael J & Buti, Marco, 2000. ""Close to Balance or in Surplus": A Policy Maker's Guide to the Implementation of the Stability and Growth Pact," CEPR Discussion Papers 2515, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Vincent Hogan, 2001. "Expansionary Fiscal Contractions?," Working Papers 200103, School Of Economics, University College Dublin. [Downloadable!]
  6. Carlos Mulas-Granados & Emanuele Baldacci & Benedict J. Clements & Sanjeev Gupta, 2002. "Expenditure Composition, Fiscal Adjustment, and Growth in Low-Income Countries," IMF Working Papers 02/77, International Monetary Fund. [Downloadable!]
  7. Andrew Mountford & Harald Uhlig, 2008. "What are the Effects of Fiscal Policy Shocks?," NBER Working Papers 14551, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer. [Downloadable!] (restricted)
  9. Philip R. Lane & Roberto Perotti, 2001. "The Importance of Composition of Fiscal Policy: Evidence from Different Exchange Rate Regimes," Trinity Economics Papers 200116, Trinity College Dublin, Department of Economics. [Downloadable!]
    Other versions:
  10. Christophe Schalck, 2007. "Effects of Fiscal Policies in Four European Countries: A Non-linear Structural VAR Approach," Economics Bulletin, Economics Bulletin, vol. 5(22), pages 1-7. [Downloadable!]
  11. Emanuele, Canegrati, 2008. "Analysis of Intergenerational Inequality: the Role of Public Expenditure and Taxation," MPRA Paper 10926, University Library of Munich, Germany. [Downloadable!]
  12. Rosaria Rita Canale & Pasquale Foresti & Ugo Marani & Oreste Napolitano, 2007. "On Keynesian effects of (apparent) non-Keynesian fiscal policies," Discussion Papers 8_2007, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
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  13. Maria Gabriella Briotti, 2005. "Economic reactions to public finance consolidation - a survey of the literature," Occasional Paper Series 38, European Central Bank. [Downloadable!]
  14. Gabriele Giudice & Alessandro Turrini & Jan in’t Veld, 2007. "Non-Keynesian Fiscal Adjustments? A Close Look at Expansionary Fiscal Consolidations in the EU," Open Economies Review, Springer, vol. 18(5), pages 613-630, November. [Downloadable!] (restricted)
  15. Bruno-Portier, Catherine & Portier, Franck, 2002. "Tax Pot Episodes in OECD Countries," CEPR Discussion Papers 3483, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  16. Alesina, Alberto F & Ardagna, Silvia & Perotti, Roberto & Schiantarelli, Fabio, 1999. "Fiscal Policy, Profits and Investment," CEPR Discussion Papers 2250, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  17. Jšrg Bibow, 2004. "Fiscal Consolidation: Contrasting Strategies & Lessons From International Experiences," Economics Working Paper Archive 400, Levy Economics Institute, The. [Downloadable!]
  18. Vincent Hogan, 2003. "Expansionary Fiscal Contractions? Evidence from Panel Data," Working Papers 200303, School Of Economics, University College Dublin. [Downloadable!]
    Other versions:
  19. Alan J. Auerbach, 2002. "Is there a role for discretionary fiscal policy?," Proceedings, Federal Reserve Bank of Kansas City, pages 109-150. [Downloadable!]
    Other versions:
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