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Non-Keynesian effects of public expenditure in Spain

Evidence is provided of non-Keynesian effects of fiscal policy in Spain within a VAR framework. Shocks to government expenditure expand activity, although moderately, in the short term, with output multipliers slightly above one. In the medium term, however, the response of output becomes significantly negative. The two main explanations proposed in the literature seem to apply here, namely higher real interest rates as a result of higher risk premia on the demand side and higher equilibrium wage reducing entrepreneurial profits and investment accordingly on the supply side.

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Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 10 (2003)
Issue (Month): 10 ()
Pages: 651-655

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Handle: RePEc:taf:apeclt:v:10:y:2003:i:10:p:651-655
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  1. Schiantarelli, Fabio & Perotti, Roberto & Ardagna, Silvia & Alesina, Alberto, 2002. "Fiscal Policy, Profits, and Investment," Scholarly Articles 4685103, Harvard University Department of Economics.
  2. Roberto Perotti, 2005. "Estimating the effects of fiscal policy in OECD countries," Proceedings, Federal Reserve Bank of San Francisco.
  3. Francisco de Castro & José Manuel González-Páramo & Pablo Hernández de Cos, 2004. "Fiscal consolidation in Spain: dynamic interdependence of public spending and revenues," Investigaciones Economicas, Fundación SEPI, vol. 28(1), pages 193-207, January.
  4. Alberto Alesina & Silvia Ardagna, 1998. "Tales of fiscal adjustment," Economic Policy, CEPR;CES;MSH, vol. 13(27), pages 487-545, October.
  5. Roberto Perotti, 2002. "Estimating the effects of fiscal policy in OECD countries," Economics Working Papers 015, European Network of Economic Policy Research Institutes.
  6. Perotti, Roberto, 2002. "Estimating the effects of fiscal policy in OECD countries," Working Paper Series 0168, European Central Bank.
  7. Ardagna, Silvia & Alesina, Alberto, 1998. "Tales of Fiscal Adjustment," Scholarly Articles 2579822, Harvard University Department of Economics.
  8. Willman, Alpo & Estrada, Ángel, 2002. "The Spanish block of the ESCB-multi-country model," Working Paper Series 0149, European Central Bank.
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