Fiscal policy and economic performance: A review of the theoretical and empirical literature

George Halkos and Epameinondas Paizanos

MPRA Paper from University Library of Munich, Germany

Abstract: The economic implications of government expenditure have been shown to be significant and broad. In particular, government spending has been shown to enhance long-run economic growth by increasing the level of human capital and Research and Development (R&D) expenditure, and by improving public infrastructure. On the other hand, there is evidence that a greater size of government spending may be less efficient and therefore not necessarily associated with a better provision of public goods and higher levels of economic growth. Moreover, it is likely that the size of government expenditure and its composition are associated with key aspects of the quality of growth, such as income inequality and environmental sustainability. This paper presents a review of the theoretical and empirical literature on the relationship between fiscal policy and economic activity, both in terms of long-run economic growth and short-term output fluctuations. In general, empirical evidence on these relationships is not robust and remains inconclusive.

Keywords: Fiscal policy; Economic growth; Government Expenditure; Taxation. (search for similar items in EconPapers)
JEL-codes: E62 H2 H5 O44 O47 Q01 Q56 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-cse, nep-fdg, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:67737

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