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Estimating the impact of public investment in the united Kingdom : Has the Golden Rule of Public Finance Made a Difference ?

Listed author(s):
  • Jérôme Creel

    (Observatoire français des conjonctures économiques)

  • Francesco Saraceno

    (Observatoire français des conjonctures économiques)

  • Paola Veroni

    (Observatoire français des conjonctures économiques)

This paper uses a SVAR methodology to investigate the effects of public investment on growth, and more specifically, the effects of the introduction of a golden rule. We extend the existing literature by estimating a model of the British economy that takes into account long run factors. This seems necessary when dealing with a multi annual variable like public investment, and its long term effects on public finances through debt accumulation. We find that in such a long run framework investment has significant and permanent positive effects on GDP growth; this result runs counter to most recent literature on the topic, that was limited to a short run specification. We further find, by comparing different subsamples, that the introduction of the golden rule in 1997 strengthened this positive effect of public investment.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/2681.

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Date of creation: 2006
Publication status: Published in Fiscal Indicators : papers presented at the Banca d'Italia workshop held in Perugia, 30 March-1 April 2006, pp.373-402
Handle: RePEc:spo:wpmain:info:hdl:2441/2681
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  1. Jerome Creel & Henri Sterdyniak, 2002. "The fiscal theory of the price level and sluggish inflation: how important shall the wealth effect be?," Documents de Travail de l'OFCE 2002-01, Observatoire Francais des Conjonctures Economiques (OFCE).
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  7. Jérôme Creel & Francesco Saraceno & Paola Veroni, 2005. "Discretionary Policy Interactions and the Fiscal Theory of the Price Level: A SVAR Analysis on French Data," Sciences Po publications info:hdl:2441/2525, Sciences Po.
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  25. repec:dau:papers:123456789/3304 is not listed on IDEAS
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