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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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  • 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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    7. Konzelmann, S., 2012. "The Economics of Austerity," Working Papers wp434, Centre for Business Research, University of Cambridge.
    8. Søren Johansen & Rocco Mosconi & Bent Nielsen, 2000. "Cointegration analysis in the presence of structural breaks in the deterministic trend," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 216-249.
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    Cited by:

    1. Kerim Peren Arin & Emin Gahramanov & Tolga Omay & Xueli Tang & Mehmet A. Ulubasoglu, 2024. "A tale of two taxes: State‐dependency of tax policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(1), pages 1-27, February.
    2. Abdul Jalil, 2020. "Debt Sustainability: Economic Growth is the Panacea," PIDE Knowledge Brief 2020:19, Pakistan Institute of Development Economics.
    3. İbrahim Özmen & Mihai Mutascu, 2024. "Public Debt and Growth: New Insights," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8706-8736, June.

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