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Demand-side economics in times of high debt: The case of the European Union

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  • Köppl-Turyna, Monika
  • Lorenz, Hanno

Abstract

We analyze the effectiveness of an increase in government consumption for stimulating growth for diverse levels of public debt in the European Union. We conclude, that growth rate can be stimulated in the short run by an increase in government consumption but only at low levels of public debt. Moreover, we find that an increase in intermediate consumption is more effective than an increase in compensation of public employees in stimulating output growth.

Suggested Citation

  • Köppl-Turyna, Monika & Lorenz, Hanno, 2016. "Demand-side economics in times of high debt: The case of the European Union," Working Papers 02, Agenda Austria.
  • Handle: RePEc:zbw:agawps:02
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    More about this item

    Keywords

    growth; fiscal stimulus; government consumption; public debt;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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