PROSPERITY OR STAGNATION: THE ROLE OF GOVERNMENT EXPENDITURES

Pak-Hung Mo

The Singapore Economic Review (SER), 2021, vol. 66, issue 05, 1153-1176

Abstract: The focus of this paper is to examine the effects and mechanism of government expenditures (GEs) in determining the long-term inflation differentials across countries. For this purpose, we formulate a theoretical model and the related regression system. The models allow us to understand and quantify the supply-side (SS) and demand-side (DS) effects of GEs in determining prosperity or stagnation across countries. This study provides cross-country evidences and related mechanisms supporting the hypothesis and conclusion that active short-term AD policies and over-estimated potential output, as argued in Orphanides (2003), were contributive to the Great Inflation.

Keywords: Inflation; government expenditures; growth; investment; prosperity; stagnation; supply-side; demand-side (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S0217590817500242

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