Do balanced-budget rules increase growth?

Joe Stone

MPRA Paper from University Library of Munich, Germany

Abstract: This study tests the hypothesis that balanced-budget rules (BBRs) that restrict public borrowing to investments in public infrastructure increase growth by increasing the productivity of debt, either because investments in public infrastructure are more productive than other uses for which states borrow funds or because BBRs lower borrowing costs. Results are based on data at 5-year intervals for 49 US states over the period 1957-2007. The tests strongly support the hypothesis that BBRs increase growth by increasing the productivity of debt and withstand a variety of robustness checks, including alternative lags, exogeneity tests, GMM estimation, a placebo test, and the influence of outliers.

Keywords: balanced budget rule; infrastructure; fiscal policy; regional growth (search for similar items in EconPapers)
JEL-codes: A1 E6 H2 R1 (search for similar items in EconPapers)
Date: 2014-07-20
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/57605/13/MPRA_paper_57605.pdf original version (application/pdf)

Related works:
Journal Article: DO BALANCED-BUDGET RULES INCREASE GROWTH? (2016)
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:57605

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 ().