The Fiscal-Growth Nexus
Technical University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); European Central Bank (ECB)
João Tovar Jalles
University of Aberdeen - Business School; European Central Bank, DG Economics - Fiscal Policies Division
February 10, 2012
Technical University of Lisbon Department of Economics Working Paper No. 01/2012/DE/UECE
We assess the fiscal-growth nexus with a large country panel, accounting for the usually encountered econometric pitfalls. Our results show that revenues have no significant impact on growth whereas expenditures have negative effects. The same is true for the OECD with the addition that government revenue has a negative impact on growth. Taxes on income are usually detrimental to growth, as well as public wages, interest payments, subsidies and government consumption have a negative effect on growth. Social spending is detrimental to growth; spending on education and health boosts growth; and there is weak evidence supporting causality running from expenditures and revenues to output and TFP.
Number of Pages in PDF File: 36
Keywords: budgetary decomposition, crises, panel analysis
JEL Classification: C23, E62, H50working papers series
Date posted: February 13, 2012
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