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Cyclical fiscal policy, credit constraints, and industry growth

  • Philippe Aghion
  • David Hemous
  • Enisse Kharroubi

This paper analyzes the impact of cyclical fiscal policy on industry growth. Using Rajan and Zingales' (1998) difference-in-difference methodology on a panel data sample of manufacturing industries across 15 OECD countries over the period 1980-2005, we show that industries with relatively heavier reliance on external finance or lower asset tangibility tend to grow faster (both in terms of value added and of labor productivity growth) in countries which implement more countercyclical fiscal policies.

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Paper provided by Bank for International Settlements in its series BIS Working Papers with number 340.

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Length: 58 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:bis:biswps:340
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  4. Philippe Aghion & Philippe Bacchetta & Romain Ranciere & Kenneth Rogoff, 2006. "Exchange Rate Volatility and Productivity Growth: The Role of Financial Development," Working Papers 06.02, Swiss National Bank, Study Center Gerzensee.
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  38. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
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