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On The Long‐Term Effects Of Fiscal Policy In The United Kingdom: The Case For A Golden Rule

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  • Jérôme Creel
  • Paola Monperrus‐Veroni
  • Francesco Saraceno

Abstract

This paper uses the SVAR methodology to investigate the effects of public investment on GDP and, more specifically, the effects of the introduction of a golden rule of public finance. We extend the existing literature by estimating a model for the British economy that takes into account long‐run factors such as public debt accumulation and policy interactions. We find that in such a long‐run framework, public investment has a significant and permanently positive effect on GDP; this result runs counter to the most recent literature on the topic using SVAR, which 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.

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  • Jérôme Creel & Paola Monperrus‐Veroni & Francesco Saraceno, 2009. "On The Long‐Term Effects Of Fiscal Policy In The United Kingdom: The Case For A Golden Rule," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(5), pages 580-607, November.
  • Handle: RePEc:bla:scotjp:v:56:y:2009:i:5:p:580-607
    DOI: 10.1111/j.1467-9485.2009.00499.x
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    References listed on IDEAS

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    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 17:53:35
    2. Regaining confidence in the euro: Three pressing issues
      by creel in OFCE le blog on 2011-12-21 19:59:21
    3. Retrouver la confiance dans l’euro : trois urgences
      by creel in OFCE le blog on 2011-10-26 15:14:25

    Citations

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    Cited by:

    1. Jean-Paul Fitoussi & Francesco Saraceno, 2013. "European economic governance: the Berlin–Washington Consensus," Cambridge Journal of Economics, Oxford University Press, vol. 37(3), pages 479-496.
    2. Georg Feigl & Markus Marterbauer & Miriam Rehm & Matthias Schnetzer & Sepp Zuckerstätter & Lars Andersen & Thea Nissen & Signe Dahl & Peter Hohlfeld & Benjamin Lojak & Thomas Theobald & Achim Truger &, 2016. "The Elusive Recovery: iAGS 2017," Sciences Po publications info:hdl:2441/55823teuik9, Sciences Po.
    3. Achim Truger, 2015. "Implementing the golden rule for public investment in Europe," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 138, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    4. Saraceno, Francesco., 2015. "Challenges for the ECB in times of deflation," ILO Working Papers 994881293402676, International Labour Organization.
    5. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9k2c8h4u2h is not listed on IDEAS
    6. Georg Feigl & Markus Marterbauer & Miriam Rehm & Matthias Schnetzer & Sepp Zuckerstätter & Lars Andersen & Thea Nissen & Signe Dahl & Peter Hohlfeld & Benjamin Lojak & Thomas Theobald & Achim Truger &, 2016. "The Elusive Recovery: iAGS 2017," Sciences Po publications info:hdl:2441/55823teuik9, Sciences Po.
    7. Francesco Saraceno, 2017. "Rethinking fiscal policy : lessons from the european monetary union," Sciences Po publications 219, Sciences Po.
    8. Francesco Saraceno, 2017. "When Keynes Goes to Brussels: A New Fiscal Rule for the EMU?," Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, Fondazione Luigi Einaudi, Torino (Italy), vol. 51(2), pages 131-157, December.
    9. Jerome Creel & Etienne Farvaque, 2009. "The political economy of balanced-budget rules," Documents de Travail de l'OFCE 2009-06, Observatoire Francais des Conjonctures Economiques (OFCE).
    10. repec:spo:wpecon:info:hdl:2441/2g7mhju69b94obeaqlen09s1au is not listed on IDEAS
    11. Hans Pitlik & Michael Klien & Stefan Schiman, 2017. "Stabilitätskonforme Berücksichtigung nachhaltiger öffentlicher Investitionen," WIFO Studies, WIFO, number 60595, June.
    12. Georg Feigl & Markus Marterbauer & Miriam Rehm & Matthias Schnetzer & Sepp Zuckerstätter & Lars Andersen & Thea Nissen & Signe Dahl & Peter Hohlfeld & Benjamin Lojak & Thomas Theobald & Achim Truger &, 2016. "Macro economic trade-offs in the euro area: Chapter 4," Sciences Po publications info:hdl:2441/1hgg8g0cu68, Sciences Po.
    13. Mathilde Le Moigne & Francesco Saraceno & Sébastien Villemot, 2016. "Probably Too Little, Certainly Too Late. An Assessment of the Juncker Investment Plan," Sciences Po publications 2016-10, Sciences Po.
    14. repec:ilo:ilowps:488129 is not listed on IDEAS
    15. Xavier Timbeau & Signe Dahl & Georg Feigl & Xavier Timbeau & Xavier Timbeau & Andrew Watt, 2016. "The Elusive Recovery. Independent Annual Growth Survey (iAGS) 2017," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 164, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    16. Christophe Blot & Marion Cochard & Jérôme Creel & Bruno Ducoudré & Danielle Schweisguth & Xavier Timbeau, 2014. "Fiscal consolidation in times of crisis: is the sooner really the better?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 159-192.
    17. Georg Feigl & Markus Marterbauer & Miriam Rehm & Matthias Schnetzer & Sepp Zuckerstätter & Lars Andersen & Thea Nissen & Signe Dahl & Peter Hohlfeld & Benjamin Lojak & Thomas Theobald & Achim Truger &, 2016. "The Elusive Recovery: iAGS 2017," Sciences Po publications info:hdl:2441/55823teuik9, Sciences Po.
    18. Philip Arestis & Malcolm Sawyer, 2011. "The economic policies of the political economy of the Australian patriot and Cambridge economist," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 8(1), pages 129-145.
    19. Popescu, Razvan-Florin & Prodan, Sergiu, 2010. "The analysis of budget rules and macroeconomic implications in several developed economies," MPRA Paper 25897, University Library of Munich, Germany, revised 2010.
    20. Achim Truger, 2015. "Implementing the Golden Rule for Public Investment in Europe: Safeguarding Public Investment and Supporting the Recovery. WWWforEurope Policy Paper No. 22," WIFO Studies, WIFO, number 57898, June.
    21. Francesco Saraceno, 2016. "The ECB: a reluctant leading character of the EMU play," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 129-151, August.

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