Fiscal policy and private investment in Greece
Maria Kasselaki () and
Athanasios Tagkalakis
International Economics, 2016, vol. 147, issue C, 53-106
Abstract:
This paper investigates the effects of fiscal policy on private non-residential investment and output in Greece. Besides examining the direct effects of fiscal consolidation, we investigate the role of financial markets and economic sentiment in the transmission of fiscal policy shocks. A tax based fiscal consolidation has more pronounced and more protracted negative effects on output and private non-residential investment relative to an expenditure based fiscal consolidation. A government spending-based fiscal consolidation improves financial markets and boosts economic sentiment. This in turn mitigates the direct negative effects of fiscal consolidation on private investment and output leading to a more rapid recovery. On the other hand, a tax hike fails to induce this positive confidence effect magnifying the negative effects of fiscal adjustment.
Keywords: Fiscal consolidation; Investment; Output; Financial markets; Economic sentiment (search for similar items in EconPapers)
JEL-codes: E22 E44 E62 O52 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2110701716300087
Full text for ScienceDirect subscribers only
Related works:
Journal Article: Fiscal policy and private investment in Greece (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:eee:inteco:v:147:y:2016:i:c:p:53-106
DOI: 10.1016/j.inteco.2016.03.003
Access Statistics for this article
International Economics is currently edited by Valerie Mignon and Marcelo Olarreaga
More articles in International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().