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Consumption and Keynesian Fiscal Policy

  • Alfredo Schclarek

This paper empirically studies the effects of fiscal policy shocks on private consumption. Further, it tries to determine if the level of government bond yield and the unemployment rate affect that relationship. We use yearly data between 1970 and 2000 for thirty-eight countries, of which half are industrialized and half are developing countries. In general, the estimation results seem to indicate that government consumption shocks have Keynesian effects for both industrial and developing countries. In the case of tax shocks, the evidence suggest that they do not have any effects on private consumption. Furthermore, there is no evidence that favors the hypothesis of expansionary fiscal consolidations.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1310.

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Date of creation: 2004
Date of revision:
Handle: RePEc:ces:ceswps:_1310
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  1. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries," European Economic Review, Elsevier, vol. 44(7), pages 1259-1289, June.
  2. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122 National Bureau of Economic Research, Inc.
  3. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
  4. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
  5. repec:taf:emetrv:v:10:y:1991:i:2:p:235-252 is not listed on IDEAS
  6. Mcleer, M. & Mckenzie, C.R., 1989. "When Are Two Step Estimators Efficient?," Papers 179, Australian National University - Department of Economics.
  7. Jönsson, Kristian, 2004. "Fiscal Policy Regimes and Household Consumption," Working Papers 2004:12, Lund University, Department of Economics.
  8. Schclarek, Alfredo, 2003. "Fiscal Policy and Private Consumption in Industrial and Developing Countries," Working Papers 2003:20, Lund University, Department of Economics, revised 30 Sep 2005.
  9. Selma Mahfouz & Richard Hemming & Michael Kell, 2002. "The Effectiveness of Fiscal Policy in Stimulating Economic Activity: A Review of the Literature," IMF Working Papers 02/208, International Monetary Fund.
  10. Francesco Giavazzi & Marco Pagano, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," NBER Working Papers 5332, National Bureau of Economic Research, Inc.
  11. Hjelm, Goran, 2002. " Effects of Fiscal Contractions: The Importance of Preceding Exchange Rate Movements," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(3), pages 423-41, September.
  12. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
  13. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1399-1436, November.
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