Fiscal Policy and Growth: Do Financial Crises Make a Difference?
European Central Bank (ECB); ISEG - Technical University of Lisbon
H. P. Gruner
University of Mannheim - Department of Economics; Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)
Christina Elisabeth Kolerus
University of Mannheim - Center for Doctoral Studies in Economics and Management (CDSEM)
March 25, 2010
Bank of Italy Occasional Paper
In this paper we assess to what extent in the existence of a financial crisis, government spending can contribute to mitigate economic downturns in the short run and whether such impact differs in crisis and non crisis times. We use panel analysis for a set of OECD and non-OECD countries for the period 1981-2007. The fiscal multiplier for the full sample for instrumented regular and crisis spending is about 0.6-0.8 considering the sample average government spending share of GDP of about one third. Altogether, we cannot reject the hypothesis that crisis spending and regular spending have the same impact using a variation of controls, sub-samples and specifications.
Number of Pages in PDF File: 22
Keywords: fiscal policy, financial crisis, growth, OECD, EU, panel analysis
JEL Classification: C23, E62, E44, F43, H50working papers series
Date posted: January 15, 2012
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