Fiscal Policy and Growth: Do Financial Crises make a Difference?

Antonio Afonso, Hans Peter Grüner and Christina Kolerus

No 2010/10, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: In this paper we assess to what extent in the existence of a financial crisis, government spending can contribute to mitigate economic downturns in the short run and whether such impact differs in crisis and non crisis times. We use panel analysis for a set of OECD and non-OECD countries for the period 1981-2007. The fiscal multiplier for the full sample for instrumented regular and crisis spending is about 0.6-0.8 considering the sample average government spending share of GDP of about one third. Altogether, we cannot reject the hypothesis that crisis spending and regular spending have the same impact using a variation of controls, sub-samples and specifications.

Keywords: fiscal policy; financial crisis; growth; OECD; EU; panel analysis. (search for similar items in EconPapers)
JEL-codes: C23 E44 E62 F43 H50 (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fdg and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Working Paper: Fiscal policy and growth: do financial crises make a difference? (2010)
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