Discretionary Government Consumption, Private Domestic Demand, and Crisis Episodes

Luca Agnello (luca.agnello01@unipa.it), Davide Furceri and Ricardo Sousa

Open Economies Review, 2013, vol. 24, issue 1, 79-100

Abstract: This paper analyzes the dynamic impact of discretionary government consumption purchases on private demand. Using a panel of 132 countries from 1960 to 2008, we find that while discretionary changes in government consumption lead to crowding-in effects in the short run, crowding-out effects take over in the medium run. In addition, we also find that both short-term crowding-in and medium-term crowding out effects are amplified once we control for periods of crisis. Copyright Springer Science+Business Media New York 2013

Keywords: Fiscal policy discretion; GDP growth; Private consumption; Private investment; Crowding-in; Crowding-out; E0; E6 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/s11079-012-9256-2

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