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A Panel Cointegration Analysis of the Relation between Private and Government Consumption




This paper analyses the relation between private and government consumption in 23 OECD countries between 1970 and 2001. In particular it addresses the issue of whether government consumption is a substitute for or a complement to private consumption. The empirical analysis is made with panel cointegration analysis, using the newly developed CUSUM cointegration test by \cite{westerlund05}. The method is extended by using a bootstrap technique to control for cross-sectional dependence. The results show that government consumption is a complement to private consumption for most of the countries and a substitute for only a few of the countries.

Suggested Citation

  • Eriksson , Åsa, 2005. "A Panel Cointegration Analysis of the Relation between Private and Government Consumption," Working Papers 2006:2, Lund University, Department of Economics.
  • Handle: RePEc:hhs:lunewp:2006_002

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    References listed on IDEAS

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    More about this item


    Private consumption; Government consumption; Panel cointegration;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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