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The fiscal policy impact to the Greek economy: Asymmetric evidence from a switching regime approach

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  • Dimitrios DIMITRIOU

    (Department of Economics, National and Kapodistrian University of Athens, 1 Sofokleous Street, 10559 Athens, Greece.)

  • Anastasios PAPPAS

    (School of Business, University of the Aegean, Michalon 8, Chios 82100, Greece.)

Abstract

This paper empirically investigates the magnitude of general government expenditures and tax income revenues to the Greek output within a regime-switching framework during the period 2000:1 – 2016:3. This nonlinear methodology captures the fiscal effects across periods of high and low growth. In more deep analysis, we examine the relationship of expenditures and GDP over time, by adopting the GARCH(1,1)-DCC methodology. Our results show that the magnitude of general government expenditures is larger during periods of low growth or economic recession, as well as the magnitude of tax income revenues. Furthermore, during the “bailout” period (2010-2016) when the fiscal adjustment was strict, GDP seem to be even stronger negatively affected by the reduction of government expenditures.

Suggested Citation

  • Dimitrios DIMITRIOU & Anastasios PAPPAS, 2018. "The fiscal policy impact to the Greek economy: Asymmetric evidence from a switching regime approach," Journal of Economics and Political Economy, KSP Journals, vol. 5(1), pages 121-131, March.
    • Handle: RePEc:ksp:journ1:v:5:y:2018:i:1:p:121-131
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Fiscal policy impact; regime switching; GARCH-DCC; Greek economy.;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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