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Identifying Fiscal Policy (in)effectiveness From The Differential Counter-cyclicality Of Government Spending In The Interwar Period

Author

Listed:
  • Nicolas-Guillaume Martineau

    (Universite de Sherbrooke)

  • Gregor W. Smith

    ()

Abstract

Differences across decades in the counter-cyclical stance of fiscal policy can identify whether the growth in government spending affects output growth and so speeds recovery from arecession. We study government-spending reaction functions from the 1920s and 1930s for twenty countries. There are two main findings. First, surprisingly, government spending was less counter-cyclical in the 1930s than in the 1920s. Second, the growth of government spending did not have a significant effect on output growth, so that there is little evidencethat this feature of fiscal policy played a stabilizing role in the interwar period.

Suggested Citation

  • Nicolas-Guillaume Martineau & Gregor W. Smith, 2014. "Identifying Fiscal Policy (in)effectiveness From The Differential Counter-cyclicality Of Government Spending In The Interwar Period," Working Paper 1290, Economics Department, Queen's University.
  • Handle: RePEc:qed:wpaper:1290
    as

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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1290.pdf
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    Cited by:

    1. Andersson, Fredrik N. G., 2020. "The Quest for Economic Stability: A Study on Swedish Stabilization Policies 1873–2019," Working Papers 2020:16, Lund University, Department of Economics.

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    More about this item

    Keywords

    fiscal policy; business-cycle history; Great Depression; interwar period;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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