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Discretionary Government Consumption, Private Domestic Demand, and Crisis Episodes

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  • Luca Agnello
  • Davide Furceri

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  • Ricardo Sousa

Abstract

This paper analyzes the dynamic impact of discretionary government consumption purchases on private demand. Using a panel of 132 countries from 1960 to 2008, we find that while discretionary changes in government consumption lead to crowding-in effects in the short run, crowding-out effects take over in the medium run. In addition, we also find that both short-term crowding-in and medium-term crowding out effects are amplified once we control for periods of crisis. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Luca Agnello & Davide Furceri & Ricardo Sousa, 2013. "Discretionary Government Consumption, Private Domestic Demand, and Crisis Episodes," Open Economies Review, Springer, vol. 24(1), pages 79-100, February.
  • Handle: RePEc:kap:openec:v:24:y:2013:i:1:p:79-100
    DOI: 10.1007/s11079-012-9256-2
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    Cited by:

    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-472, May.

    More about this item

    Keywords

    Fiscal policy discretion; GDP growth; Private consumption; Private investment; Crowding-in; Crowding-out; E0; E6;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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