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Non-Keynesian effects of public expenditure in Spain


  • Francisco de Castro


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.

Suggested Citation

  • Francisco de Castro, 2003. "Non-Keynesian effects of public expenditure in Spain," Applied Economics Letters, Taylor & Francis Journals, vol. 10(10), pages 651-655.
  • Handle: RePEc:taf:apeclt:v:10:y:2003:i:10:p:651-655 DOI: 10.1080/1350485032000136397

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    References listed on IDEAS

    1. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, vol. 92(3), pages 571-589, June.
    2. Roberto Perotti, 2005. "Estimating the effects of fiscal policy in OECD countries," Proceedings, Federal Reserve Bank of San Francisco.
    3. Perotti, Roberto, 2002. "Estimating the effects of fiscal policy in OECD countries," Working Paper Series 0168, European Central Bank.
    4. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1329-1368.
    5. Ardagna, Silvia & Alesina, Alberto, 1998. "Tales of Fiscal Adjustment," Scholarly Articles 2579822, Harvard University Department of Economics.
    6. Roberto Perotti, 2002. "Estimating the effects of fiscal policy in OECD countries," Economics Working Papers 015, European Network of Economic Policy Research Institutes.
    7. Alberto Alesina & Silvia Ardagna, 1998. "Tales of fiscal adjustment," Economic Policy, CEPR;CES;MSH, vol. 13(27), pages 487-545, October.
    8. Willman, Alpo & Estrada, Ángel, 2002. "The Spanish block of the ESCB-multi-country model," Working Paper Series 0149, European Central Bank.
    9. 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.
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    Cited by:

    1. Burger, Anton, 2006. "Reasons for the U.S. growth period in the nineties: non-keynesian effects, asset wealth and productivity," Department of Economics Working Paper Series 1360, WU Vienna University of Economics and Business.
    2. Anton Burger & Martin Zagler, 2007. "Reasons for the U.S. growth period in the nineties: non-keynesian effects, asset wealth and productivity," Department of Economics Working Papers wuwp095, Vienna University of Economics and Business, Department of Economics.
    3. Anton Burger & Martin Zagler, 2008. "US growth and budget consolidation in the 1990s: was there a non-Keynesian effect?," International Economics and Economic Policy, Springer, vol. 5(1), pages 225-235, July.

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