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Growth in a time of austerity: evidence from the UK

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  • Juergen Amann
  • Paul Middleditch

Abstract

A recent recovery in the United Kingdom comes after a program of austerity measures announced by the incoming coalition government in 2010. Can the recent pick up in economic activity be attributed to this controversial fiscal policy? This paper uses an empirical approach to test the causal relationship between debt and growth for the case of the UK using monthly time series data between 1995 and 2013. This time series perspective makes use of Granger-causality and co-integration tests that allow for non-stationarity in macroeconomic time series data. We find that controlling for structural breaks in this way leads us to the finding of no empirical support for the hypothesis that fiscal discipline can restore economic activity after a recession.
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Suggested Citation

  • Juergen Amann & Paul Middleditch, 2017. "Growth in a time of austerity: evidence from the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 349-375, September.
  • Handle: RePEc:bla:scotjp:v:64:y:2017:i:4:p:349-375
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    File URL: http://hdl.handle.net/10.1111/sjpe.12132
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