Does fiscal federalism matter for economic growth? Evidence from the United States

Yıldız Özkök and İbrahim Çütcü

Applied Economics, 2022, vol. 54, issue 24, 2810-2824

Abstract: Fiscal federalism can improve macroeconomic performance by increasing the efficiency and performance of the public sector. The aim of this study is to analyse the long-term relationship between fiscal federalism and economic growth during the period of 1961–2018 in the United States. In this analysis, first of all, the Hatemi-J Co-integration test was used to determine the long-term relationship between the variables, and accordingly it was determined that there is a long-term relationship between the variables at the 1% significance level. Then, the causality relationship between variables was tested using Hacker–Hatemi-J bootstrap causality analysis and no causality relationship was found among the variables. Finally, a time-varying causality test was applied, since the causality relationship between variables may lose its validity at some time points, especially in global economies. It was found that there is a causality relationship between variables when sub-periods are considered.

Date: 2022
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DOI: 10.1080/00036846.2021.1998337

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