Expansionary fiscal contractions? Evidence from panel data

Vincent Hogan ()

No 200303, Working Papers from School of Economics, University College Dublin

Abstract: We examine the ability of the Expansionary Fiscal Contraction (EFC) hypothesis to explain the performance of of OECD economies during times of crisis. We find some limited evidence in its favour: if public consumption is reduced in response to a fiscal crisis (as defined by a high level of debt), private consumption does seem to increase. However the size of the effect is smaller than that typically found in similar studies. Furthermore, the increase in private consumption is not usually sufficient to offset the direct effect of a reduction in the public consumption on output fiscal contractions are not literally expansionary.

Keywords: Consumption; Saving; Fiscal policy; Organisation for Economic Co-operation and Development; Fiscal policy; Saving and investment (search for similar items in EconPapers)
JEL-codes: E21 E62 (search for similar items in EconPapers)
Date: 2003-01
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http://hdl.handle.net/10197/933 First version, 2003 (application/pdf)

Related works:
Journal Article: Expansionary Fiscal Contractions? Evidence from Panel Data (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:200303

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