Government spending, multipliers, and public debt sustainability: an empirical assessment for OECD countries

Giovanna Ciaffi (), Matteo Deleidi and Michele Capriati ()
Additional contact information
Giovanna Ciaffi: Roma Tre University
Michele Capriati: University of Bari Aldo Moro

Economia Politica: Journal of Analytical and Institutional Economics, 2024, vol. 41, issue 2, No 9, 542 pages

Abstract: Abstract This paper aims to quantify the linear and non-linear effects of government expenditure on output and public debt sustainability using the Local Projections (LP) approach on a dataset of 14 OECD countries considered for the 1981–2017 period. By employing the Blanchard and Perotti strategy to identify fiscal policy shocks, we show that government spending multipliers are close to one in linear models and that expansionary fiscal policy stimuli reduce the public debt-to-GDP ratio. When considering non-linearities using the smooth transition LP model, findings show that a fiscal policy shock leads to higher multipliers and a stronger reduction in the public debt-to-GDP ratio in economic phases characterised by a high rather than a low debt-to-GDP ratio. All results are confirmed even when government spending expectations are considered.

Keywords: Fiscal multipliers; Non-linearities; Public debt sustainability; Government expenditure; Local projections; OECD countries (search for similar items in EconPapers)
JEL-codes: C33 E62 H50 H60 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s40888-024-00335-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:spr:epolit:v:41:y:2024:i:2:d:10.1007_s40888-024-00335-0

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40888

DOI: 10.1007/s40888-024-00335-0

Access Statistics for this article

Economia Politica: Journal of Analytical and Institutional Economics is currently edited by Alberto Quadrio Curzio

More articles in Economia Politica: Journal of Analytical and Institutional Economics from Springer, Fondazione Edison
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().