Has the Golden Rule of Public Finance Made a difference in the UK

Jerome Creel, Paola Veroni () and Francesco Saraceno
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Paola Veroni: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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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)
Date: 2007-04
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-00972843
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Citations: View citations in EconPapers (20)

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Related works:
Working Paper: Has the Golden Rule of Public Finance Made a Difference in the UK ? (2007)
Working Paper: Has the Golden Rule of Public Finance Made a difference in the UK (2007)
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