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On the Effects of Government Spending Shocks in Developing Countries

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  • Magda Kandil

Abstract

Time series analysis of annual data for a sample of developing countries shows the allocation of government spending shocks, both positive and negative, between price inflation and output growth. Cross-country regressions evaluate determinants of the difference in the real effects of government spending shocks. If the real effects decrease, capacity constraints are more binding and if they increase, the elasticity of aggregate demand is larger with respect to the change in government spending. Cross-country regressions also evaluate the implications of government spending shocks on the difference in trend price inflation and output growth. The variability of government spending shocks decreases trend real output growth and increases trend price inflation across countries.

Suggested Citation

  • Magda Kandil, 2005. "On the Effects of Government Spending Shocks in Developing Countries," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 269-304.
  • Handle: RePEc:taf:oxdevs:v:33:y:2005:i:2:p:269-304 DOI: 10.1080/13600810500137970
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    References listed on IDEAS

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    1. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, pages 103-132.
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    4. Dosi, Giovanni, 1993. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, pages 102-103.
    5. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-193, May.
    6. Blomstrom, Magnus & Persson, Hakan, 1983. "Foreign investment and spillover efficiency in an underdeveloped economy: Evidence from the Mexican manufacturing industry," World Development, Elsevier, vol. 11(6), pages 493-501, June.
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    Cited by:

    1. Magda Kandil & Hanan Morsy, 2014. "Fiscal Stimulus and Credibility in Emerging Countries," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, pages 420-439.
    2. Abu S. Shonchoy, 2016. "Political Institutions, Governance, And Consumption Expenditure In Developing Countries: A Panel Data Analysis," Contemporary Economic Policy, Western Economic Association International, vol. 34(4), pages 710-728, October.
    3. Magda Kandil & Hanan Morsy, 2014. "Fiscal Stimulus and Credibility in Emerging Countries," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, pages 420-439.

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