Output Growth and Unexpected Government Expenditures

Diego Escobari and Andre Mollick ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper takes into account the dynamic feedback between government expenditures and output in a model that separates the effects of expected and unexpected government expenditures on output. We allow for standard determinants based on Solow’s growth model, as well as financial globalization and trade openness measures for a sample of 56 industrial and emerging market economies over the 1970-2004 period. We find that unanticipated government expenditures have negative and significant effects on output growth, with higher effects in developed economies. Along with savings responses, we interpret these results based on how fiscal policy reacts to business cycles. Anticipated government expenditures have negative - but smaller effects - on output growth. These results are very robust to a recursive treatment of expectations, which reinforces the role of new information in an increasingly integrated world economy.

Keywords: Dynamic Panels; Economic Growth; Expected and Unexpected Government Expenditures; Globalization. (search for similar items in EconPapers)
JEL-codes: E32 E62 F43 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-fdg, nep-mac, nep-pbe and nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/48969/1/MPRA_paper_48969.pdf original version (application/pdf)

Related works:
Journal Article: Output growth and unexpected government expenditures (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:48969

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().