The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD Countries

Norman Gemmell, Richard Kneller and Ismael Sanz

Economic Journal, 2011, vol. 121, issue 550, F33-F58

Abstract: The literatures testing for aggregate short-run or long‐run growth impacts of fiscal policy use quite different methodologies. The former generally focuses on temporary fiscal ‘shocks’; the latter typically have no short‐run dynamics or assume homogeneity. We use regression methods that treat heterogeneous short‐run dynamics explicitly within a long‐run model. Results suggest that previously estimated ‘long‐run’ growth effects of fiscal policy are typically achieved quickly, consistent with results from short‐run models. In principle these short‐run effects ‘persist’; in practice regular fiscal policy changes in OECD countries mean that persistent increases or decreases in growth rates are rare.

Date: 2011
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