Identifying fiscal policy (in)effectiveness from the differential counter-cyclicality of government spending in the interwar period

Nicolas-Guillaume Martineau () and Gregor Smith

Canadian Journal of Economics, 2015, vol. 48, issue 4, 1291-1320

Abstract: Differences across decades in the counter-cyclical stance of fiscal policy can identify whether the growth in government spending affects output growth and so speeds recovery from a recession. We study government-spending reaction functions from the 1920s and 1930s for twenty countries. There are two main findings. First, surprisingly, government spending was less counter-cyclical in the 1930s than in the 1920s. Second, the growth of government spending did not have a significant effect on output growth, so that there is little evidence that this feature of fiscal policy played a stabilizing role in the interwar period.

JEL-codes: E62 (search for similar items in EconPapers)
Date: 2015
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Related works:
Journal Article: Identifying fiscal policy (in)effectiveness from the differential counter‐cyclicality of government spending in the interwar period (2015)
Working Paper: Identifying Fiscal Policy (in)effectiveness From The Differential Counter-cyclicality Of Government Spending In The Interwar Period (2014)
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