The Cyclical and Long-Term Behavior of Government Expenditures in Developing Countries

24 Pages Posted: 9 Feb 2006

See all articles by Bernardin Akitoby

Bernardin Akitoby

International Monetary Fund (IMF) - Fiscal Affairs Department

Benedict Clements

International Monetary Fund (IMF) - African Department

Sanjeev Gupta

International Monetary Fund (IMF) - Fiscal Affairs Department

Gabriela Inchauste

World Bank

Date Written: October 2004

Abstract

We examine the short- and long-term movements of government spending relative to output in 51 countries. We find that in the short term, the main components of government spending increase with output in about half of the sample countries, with some variation across spending categories and countries. Further, we find that there is a long-term relationship between government spending and output (in line with "Wagner`s law") for the majority of countries for at least one spending aggregate. In the short term, we find that power dispersion and government size typically dampen the positive response of government spending to output. Output volatility and financial risk, on the other hand, contribute to the procylicality of government spending.

Keywords: Fiscal policy, Business cycles, Wagner`s law

JEL Classification: E62, H50, H60

Suggested Citation

Akitoby, Bernardin and Clements, Benedict and Gupta, Sanjeev and Inchauste Comboni, Maria Gabriela, The Cyclical and Long-Term Behavior of Government Expenditures in Developing Countries (October 2004). IMF Working Paper No. 04/202, Available at SSRN: https://ssrn.com/abstract=879027

Bernardin Akitoby (Contact Author)

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Benedict Clements

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Sanjeev Gupta

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Maria Gabriela Inchauste Comboni

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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