domestic consumption: the effect of fiscal policy
Sudhendu Giri,
Published in International Journal of Advanced Research in Economics and Commerce
ISSN: xxxx-xxxx Impact Factor:xx Volume:1 Issue:1 Year: 08 June,2013 Pages:45-70
Abstract
This paper is an attempt to study the effects of fiscal policy during different fiscal policy regimes. More specifically, paper investigates how different factors, such as size, duration and composition of fiscal changes, can alter the effects of fiscal policy on private consumption. Using an unbalanced panel of 19 OECD countries during the period 1960-2000, research finds that transfer changes are believed to be permanent during fiscal contractions. Hence, it is more likely that an expansionary fiscal contraction will occur if the government cuts transfers. The results highlight the importance of accounting for specific circumstances, such as the debt and deficit position, when studying expansionary fiscal contractions. The results also indicate that expansionary fiscal contractions are likely to come at a considerable social cost.
Kewords
Panel data; Household consumption; Fiscal policy; Non-Keynesian effects.
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