Advanced Search
MyIDEAS: Login

Has the Golden Rule of Public Finance Made a difference in the UK

Contents:

Author Info

  • Jérôme Creel

    (OFCE)

  • Francesco Saraceno

    (OFCE)

  • Paola Veroni

    (OFCE)

Abstract

This paper uses the SVAR methodology to investigate the effects of public investment on growth, and more specifically, the effects of the introduction of a golden rule of public finance. We extend the existing literature by estimating a model of the British economy that takes into account long run factors such as public debt accumulation. We find that in such a long run framework, public investment has a significant and permanently positive effect on GDP growth; this result runs counter to the most recent literature on the topic that was limited to a short run specification. We further find, by comparing different subsamples, that the introduction of the golden rule in 1997 strengthened the positive effect of public investment.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://spire.sciencespo.fr/hdl:/2441/1181/resources/wp2007-13creel-v-c3-a9roni-saraceno.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Sciences Po in its series Sciences Po publications with number 2007-13.

as in new window
Length:
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:spo:wpmain:info:hdl:2441/1181

Contact details of provider:
Web page: http://www.sciencespo.fr/
More information through EDIRC

Related research

Keywords: fiscal policy; golden rule of public finance; Structural VAR; Public Investment; UK Economy;

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1.
    • Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1.
  2. Jérôme Creel & Henri Sterdyniak, 2002. "The fiscal theory of the price level and sluggish inflation: how important shall the wealth effect be?," Sciences Po publications 2002-01, Sciences Po.
  3. Ratner, Jonathan B., 1983. "Government capital and the production function for U.S. private output," Economics Letters, Elsevier, vol. 13(2-3), pages 213-217.
  4. Jan Egbert Sturm & Jakob de Haan,, 1994. "Is public expenditure really productive? New evidence for the US and the Netherlands," Working Papers 20, Centre for Economic Research, University of Groningen and University of Twente.
  5. Otto, Glenn & Voss, Graham M, 1994. "Public Capital and Private Sector Productivity," The Economic Record, The Economic Society of Australia, vol. 70(209), pages 121-32, June.
  6. James H. Stock & Mark W. Watson, 2001. "Vector Autoregressions," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 101-115, Fall.
  7. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
  8. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  9. António Afonso & Ludger Schuknecht & Vito Tanzi, 2006. "Public Sector Efficiency: Evidence for New EU Member States and Emerging Markets," Working Papers Department of Economics 2006/01, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  10. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  11. Voss, Graham M., 2002. "Public and private investment in the United States and Canada," Economic Modelling, Elsevier, vol. 19(4), pages 641-664, August.
  12. Blanchard, Olivier J & Giavazzi, Francesco, 2004. "Improving the SGP Through a Proper Accounting of Public Investment," CEPR Discussion Papers 4220, C.E.P.R. Discussion Papers.
  13. Evans, Paul & Karras, Georgios, 1994. "Is government capital productive? Evidence from a panel of seven countries," Journal of Macroeconomics, Elsevier, vol. 16(2), pages 271-279.
  14. Berndt, Ernst & Hansson, Bengt, 1992. "Measuring the Contribution of Capital in Sweden," Working Paper Series 365, Research Institute of Industrial Economics.
  15. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
  16. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  17. Garcia-Mila, Teresa & McGuire, Therese J., 1992. "The contribution of publicly provided inputs to states' economies," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 229-241, June.
  18. Berndt, Ernst R & Hansson, Bengt, 1992. " Measuring the Contribution of Public Infrastructure Capital in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S151-68, Supplemen.
  19. Sturm, Jan-egbert & Jacobs, Jan & Groote, Peter, 1999. "Output Effects of Infrastructure Investment in the Netherlands, 1853-1913," Journal of Macroeconomics, Elsevier, vol. 21(2), pages 355-380, April.
  20. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
  21. Buiter, Willem H, 2001. "Notes on 'A Code for Fiscal Stability.'," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 1-19, January.
  22. Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc.
  23. Sébastien Dessus & Rémy Herrera, 1996. "Le rôle du capital public dans la croissance des pays en développement au cours des années 80," OECD Development Centre Working Papers 115, OECD Publishing.
  24. Otto, Glenn & Voss, Graham, 1996. "Public Capital and Private Production in Australia," MPRA Paper 52110, University Library of Munich, Germany.
  25. McMillin, W Douglas & Smyth, David J, 1994. "A Multivariate Time Series Analysis of the United States Aggregate Production Function," Empirical Economics, Springer, vol. 19(4), pages 659-73.
  26. Leith, Campbell & Wren-Lewis, Simon, 2000. "Interactions between Monetary and Fiscal Policy Rules," Economic Journal, Royal Economic Society, vol. 110(462), pages C93-108, March.
  27. Roberto Perotti, 2004. "Public investment: another (different) look," Working Papers 277, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  28. Johanna Elisabeth Ligthart, 2000. "Public Capital and Output Growth in Portugal," IMF Working Papers 00/11, International Monetary Fund.
  29. Heijdra, Ben J. & Meijdam, Lex, 2002. "Public investment and intergenerational distribution," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 707-735, May.
  30. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
  31. Malcolm Knight & Norman Loayza & Delano Villanueva, 1993. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 512-541, September.
  32. Michael Bleaney & Norman Gemmell & Richard Kneller, 2001. "Testing the endogenous growth model: public expenditure, taxation, and growth over the long run," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 36-57, February.
  33. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
  34. Merriman, David, 1991. "Public capital and regional output : Another look at some Japanese and American data," Regional Science and Urban Economics, Elsevier, vol. 20(4), pages 437-458, February.
  35. Richard H. Clarida, 1993. "International Capital Mobility, Public Investment and Economic Growth," NBER Working Papers 4506, National Bureau of Economic Research, Inc.
  36. Wim P. M. Vijverberg & Chu-Ping C. Vijverberg & Janet L. Gamble, 1997. "Public Capital And Private Productivity," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 267-278, May.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. More on the Euro Crisis
    by Francesco Saraceno in Sparse Thoughts of a Gloomy European Economist on 2011-11-01 12:53:35
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Roberto Perotti, 2007. "In Search of the Transmission Mechanism of Fiscal Policy," NBER Working Papers 13143, National Bureau of Economic Research, Inc.
  2. Jean-Paul Fitoussi & Francesco Saraceno, 2008. "Fiscal Discipline as a Social Norm: The European Stability Pact," Sciences Po publications info:hdl:2441/9909, Sciences Po.
  3. Philip Arestis & John McCombie, 2009. "On The Effectiveness Of Fiscal Policy As An Instrument Of Macroeconomic Policy," Economic Affairs, Wiley Blackwell, vol. 29(1), pages 77-79, 03.
  4. Frédéric Marty, 2007. "Partenariats public-privé, règles de discipline budgétaire, comptabilité patrimoniale et stratégies de hors bilan," Documents de Travail de l'OFCE 2007-29, Observatoire Francais des Conjonctures Economiques (OFCE).
  5. Philip Arestis, 2011. "Fiscal Policy Is Still an Effective Instrument of Macroeconomic Policy," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(2), pages 143-156, June.
  6. Guillermo Perry & Luis Servén & Rodrigo Suescún, 2008. "Fiscal Policy, Stabilization, and Growth : Prudence or Abstinence," World Bank Publications, The World Bank, number 6818, October.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:spo:wpmain:info:hdl:2441/1181. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Spire @ Sciences Po Library).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.