Government Size and Business Cycle Volatility; How Important Are Credit Constraints?

Markus Leibrecht () and Johann Scharler

Working Papers from Faculty of Economics and Statistics, Universität Innsbruck

Abstract: In this paper we analyze how the availability of credit influences the relationship between government size as a proxy for fiscal stabilization policy and the amplitude of business cycle fluctuations in a sample of advanced OECD countries. Interpreting relatively low loan-tovalue ratios as an indication for tight credit constraints, we find that government size exerts a stabilizing effect on output and consumption growth fluctuations only when credit constraints are relatively tight. Our results are robust with respect to different measures of government size and provide support for the hypothesis that credit market frictions play a crucial role in the transmission of fiscal policy.

Keywords: business cycle; volatility; fiscal policy; stabilization policy (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Pages: 32
Date: 2012-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www2.uibk.ac.at/downloads/c4041030/wpaper/2012-04.pdf (application/pdf)

Related works:
Journal Article: Government Size and Business Cycle Volatility: How Important are Credit Constraints? (2015)
Working Paper: Government Size and Business Cycle Volatility; How Important Are Credit Constraints? (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inn:wpaper:2012-04

Access Statistics for this paper

More papers in Working Papers from Faculty of Economics and Statistics, Universität Innsbruck Contact information at EDIRC.
Bibliographic data for series maintained by Judith Courian ( this e-mail address is bad, please contact ).