Discretionary fiscal policy and economic activity in Greece

Athanasios Tagkalakis

Empirica, 2014, vol. 41, issue 4, 687-712

Abstract: This paper investigates the effects of discretionary fiscal policy changes on economic activity and its subcomponents in Greece in the period 2000–2011. Changes in government spending and net taxes have Keynesian effects. An increase in government consumption has the most pronounced positive effects on output growth, private consumption and non-residential investment, while it reduces residential investment. Cuts in the public investment programme crowd in private investment, but are associated negatively with the net exports ratio. Both indirect and direct tax hikes lower private consumption, private investment and output growth. However, higher direct taxes by lowering disposable income they reduce import demand, thus, improving the trade balance. Copyright Springer Science+Business Media New York 2014

Keywords: Discretionary fiscal policy; Economic growth; Consumption; Investment; Net exports; E62; O52; H30 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Discretionary fiscal policy and economic activity in Greece (2013)
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DOI: 10.1007/s10663-013-9232-0

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