Fiscal Policy and Growth in the Euro Area Periphery: Does the Business Cycle Matter?

Sotiris Papaioannou ()

Chapter Chapter 6 in Money, Trade and Finance, 2021, pp 107-129 from Springer

Abstract: Abstract We analyze if the growth influence of fiscal policy can be affected by business cycle conditions. Markov Switching regression results are reported on quarterly data for five peripheral EU countries (Spain, Italy, Portugal, Ireland and Cyprus) and show us that the effects of public spending on growth are asymmetric over the business cycle. The highest influence on growth is observed when the output gap is low or negative. On the contrary, in periods of high and positive output gaps, the impact of public spending remains weak or even becomes negative.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-73219-6_6

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DOI: 10.1007/978-3-030-73219-6_6

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