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Is Government Spending Stimulative?

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  • DAVID ALAN ASCHAUER

Abstract

This paper develops and implements a neoclassical model of fiscal policy. The paper's main empirical hypothesis is that government non-military investment spending is more expansionary than is either government consumption or military investment. The paper utilizes annual data to support the hypothesis. It finds that output "multipliers" for government non-military investment significantly exceed unity while multipliers for government consumption and military investment lie below unity. The paper also finds that public sector deficits-both actual and cyclically adjusted-contain minor explanatory power for output when one controls for the effects of non-military investment. Copyright 1990 Western Economic Association International.

Suggested Citation

  • David Alan Aschauer, 1990. "Is Government Spending Stimulative?," Contemporary Economic Policy, Western Economic Association International, vol. 8(4), pages 30-46, October.
  • Handle: RePEc:bla:coecpo:v:8:y:1990:i:4:p:30-46
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    Cited by:

    1. Sharon J. Erenburg, "undated". "Linking Public Capital to Economic Performance, Public Capital: The Missing Link Between Investment and Economic Growth ," Economics Public Policy Brief Archive 14, Levy Economics Institute.
    2. N Bose & M E Haque & D R Osborn, 2003. "Public Expenditure and Growth in Developing Countries: Education is the Key," Centre for Growth and Business Cycle Research Discussion Paper Series 30, Economics, The Univeristy of Manchester.
    3. Andrés Rodríguez-Pose & Sylvia A R Tijmstra & Adala Bwire, 2009. "Fiscal decentralisation, efficiency, and growth," Environment and Planning A, Pion Ltd, London, vol. 41(9), pages 2041-2062, September.
    4. Vitor Carvalho & Manuel M. F. Martins, 2011. "Investment and output effects of fiscal consolidations in a new-Keynesian DSGE model for the Euro Area: composition matters?," EcoMod2011 3246, EcoMod.
    5. Miguel D. Ramirez, 2006. "Does Foreign Direct Investment Enhance Labor Productivity Growth in Chile? A Cointegration Analysis," Eastern Economic Journal, Eastern Economic Association, vol. 32(2), pages 205-220, Spring.
    6. Davtyan Azat, 2014. "GMM Estimation and Shapiro-Francia Normality Test: A Case Study of CEE Economies," International Journal of Economic Sciences, University of Economics, Prague, vol. 2014(1), pages 12-26.
    7. Miguel Ramirez & Zsófia Kőműves, 2014. "Economic Infrastructure, Private Capital Formation, and FDI Inflows to Hungary: A Unit Root and Cointegration Analysis with Structural Breaks," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(4), pages 367-382, December.
    8. Ansari, M. I., 2002. "Impact of financial development, money, and public spending on Malaysian national income: an econometric study," Journal of Asian Economics, Elsevier, vol. 13(1), pages 72-93.
    9. Sutaria, Vinod & Hicks, Donald, 2002. "The determinants of new firm formation dynamics," ERSA conference papers ersa02p399, European Regional Science Association.
    10. Rajkumar, Andrew Sunil*Swaroop, Vinaya, 2002. "Public spending and outcomes : does governance matter?," Policy Research Working Paper Series 2840, The World Bank.
    11. Ramirez, Miguel D., 2006. "Is foreign direct investment beneficial for Mexico? An empirical analysis, 1960-2001," World Development, Elsevier, vol. 34(5), pages 802-817, May.
    12. Michael Koetter & Michael Wedow, 2013. "Transfer Payments without Growth: Evidence for German Regions, 1992–2005," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 37(4), pages 1438-1455, July.
    13. Fu, Feng-Cheng & Vijverberg, Chu-Ping C. & Vijverberg, Wim P., 2004. "Public Infrastructure as a Determinant of Intertemporal and Interregional Productive Performance in China," IZA Discussion Papers 1019, Institute for the Study of Labor (IZA).
    14. Allcott, Hunt & Lederman, Daniel & Lopez, Ramon, 2006. "Political institutions, inequality, and agricultural growth : the public expenditure connection," Policy Research Working Paper Series 3902, The World Bank.
    15. Vitor M. Carvalho & Manuel M. F. Martins, 2011. "Macroeconomic effects of fiscal consolidations in a DSGE model for the Euro Area: does composition matter?," FEP Working Papers 421, Universidade do Porto, Faculdade de Economia do Porto.
    16. Andrew R. Goetz, 2011. "The Global Economic Crisis, Investment in Transport Infrastructure, and Economic Development," Chapters,in: Transportation and Economic Development Challenges, chapter 3 Edward Elgar Publishing.
    17. Ansari, M. I., 1996. "Monetary vs. fiscal policy: Some evidence from vector autoregression for India," Journal of Asian Economics, Elsevier, vol. 7(4), pages 677-698.
    18. G.E. Hebbink, 2000. "Demographic ageing and sustainability of fiscal policy: projections with a renewed generational accounting model," WO Research Memoranda (discontinued) 609, Netherlands Central Bank, Research Department.
    19. repec:eur:ejserj:76 is not listed on IDEAS

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