The Relationship between Large Fiscal Adjustments and Short-Term Output Growth Under Alternative Fiscal Policy Regimes

Stephen Miller and Frank Russek ()

No 1999-04, Working papers from University of Connecticut, Department of Economics

Abstract: A small, but growing, body of literature searches for evidence of non-Keynesian effects of fiscal contractions. That is, some evidence exists that large fiscal contractions stimulate short-run economic activity. Our paper continues this research effort by systematically examining the effects, if any, of unusual fiscal events - either non-Keynesian results within a Keynesian model or Keynesian results within a neoclassical model -- on short-run economic activity. We examine this issue within three separate models -- a St. Louis equation, a Hall-type consumption equation, and a growth accounting equation. Our empirical findings are mixed, and do not provide strong systematic support for the view that unusually large fiscal contractions/expansions reverse the effects of normal fiscal events. Moreover, we find only limited evidence that trigger points are empirically important.

Pages: 41 pages
Date: 1999-10, Revised 2002-03
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Citations: View citations in EconPapers (18)

Published in Contemporary Economic Policy, January 2003

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Related works:
Journal Article: THE RELATIONSHIP BETWEEN LARGE FISCAL ADJUSTMENTS AND SHORT‐TERM OUTPUT GROWTH UNDER ALTERNATIVE FISCAL POLICY REGIMES (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:1999-04

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