Public spending, monetary policy and growth: Evidence from EU countries

Sotiris Papaioannou ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines whether differences in monetary policy are associated with diverging effects of public spending on growth. At first stage, we estimate public spending multipliers for each country of the European Union (EU). Their size varies considerably across countries. Then we incorporate in the analysis the role of monetary policy and examine whether real interest rates affect the relationship between public spending and growth. The main result of the econometric analysis is that government spending can affect growth positively only when real interest rates become negative. This result remains robust to several changes in the econometric specification and measures of interest rate.

Keywords: Public spending; Fiscal multipliers; Monetary policy; Economic growth. (search for similar items in EconPapers)
JEL-codes: E43 E62 O40 (search for similar items in EconPapers)
Date: 2016-03-15
New Economics Papers: this item is included in nep-eec, nep-fdg, nep-mac, nep-mon and nep-pbe
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:70331

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