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Has the Golden Rule of Public Finance Made a Difference in the UK ?

Jerome Creel (), Paola Monperrus-Veroni and Francesco Saraceno ()

No 2007-13, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: This paper uses the SVAR methodology to investigate the effects of public investment on growth, and more specifically, the effects of the introduction of a golden rule of public finance. We extend the existing literature by estimating a model of the British economy that takes into account long run factors such as public debt accumulation. We find that in such a long run framework, public investment has a significant and permanently positive effect on GDP growth; this result runs counter to the most recent literature on the topic that was limited to a short run specification. We further find, by comparing different subsamples, that the introduction of the golden rule in 1997 strengthened the positive effect of public investment.

Keywords: fiscal policy; golden rule of public finance; Structural VAR; Public Investment; UK Economy (search for similar items in EconPapers)
JEL-codes: C32 E60 E63 H60 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-eec, nep-mac and nep-pbe
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http://www.ofce.sciences-po.fr/pdf/dtravail/WP2007-13.pdf (application/pdf)

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Working Paper: Has the Golden Rule of Public Finance Made a difference in the UK (2007) Downloads
Working Paper: Has the Golden Rule of Public Finance Made a difference in the UK (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:0713

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