 Revisiting the growth effects of fiscal policy: A Bayesian model averaging approachKerim Arin, Elias Braunfels and Gernot Doppelhofer Journal of Macroeconomics, 2019, vol. 62, issue C Abstract: Motivated by the mixed evidence in previous literature, we re-examine the effects of various types of government spending, taxes, and overall budget surplus/deficit, on economic growth. To address the model uncertainty issue that may have plagued earlier studies, we employ a Bayesian Model Averaging (BMA) approach. We use a panel data set for OECD countries for the 1990–2013 period, and allow for a wide range of other potential growth determinants. The results suggest a robust link between only some fiscal variables and economic growth in the short to medium run. On the spending side, productive public spending has a robust positive effect on growth. On the revenue side, we document a robust negative effect for the top corporate tax rate. Finally, our results suggest that a cyclically adjusted budget surplus has a robust positive effect on economic performance. Some, but limited, evidence points to effects of productive expenditure and of top income tax rates on medium-to-long-run growth. With regard to timing of short-to-medium run effects, our results show that most effects occur with a lag of two years. Keywords: Fiscal policy; Public spending; Taxes; Economic growth (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:62:y:2019:i:c:s0164070418302039 DOI: 10.1016/j.jmacro.2019.103158 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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