Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries

Francesco Giavazzi (), Tullio Jappelli () and Marco Pagano

No 7460, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Several recent studies suggest that the response of national saving to fiscal policy may be non-linear. In this paper we use two data sets to search for the circumstances in which such non-linear responses may arise: a sample of OECD countries used in previous studies, and sample of developing countries, using more recent World Bank data. We find that in both samples non-linear effects tend to be associated with large and persistent fiscal impulses. In the OECD sample the non-linearity of the response is stronger for fiscal contractions than for expansions. An increase in net taxes has no effect on national saving during large fiscal contractions, while it has a positive effect in less pronounced contractions. High or rapidly growing public debt does not appear to be a good predictor of non-linear effects. In the World Bank sample of developing countries, non-linearities in the response national saving to fiscal policy are not limited to large fiscal contractions, and also tend to occur in periods in which debt is accumulating rapidly, regardless of its initial level.

JEL-codes: E21 E62 (search for similar items in EconPapers)
Date: 2000-01
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (285)

Published as Giavazzi, Francesco, Tullio Jappelli and Marco Pagano. "Searching For Non-Linear Effects Of Fiscal Policy: Evidence From Industrial And Developing Countries," European Economic Review, 2000, v44(7,Jun), 1291-1326.

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Journal Article: Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries (2000)
Working Paper: Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries (2000)
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