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Essays on Fiscal Policy, Public Debt and Financial Development

Schclarek Curutchet, Alfredo LU (2006) In Lund Economic Studies 136.
Abstract
This thesis consists of three distinct articles that can be read separately. Each one has been awarded a chapter of its own. The independence of these chapters should not be taken as meaning that they are unrelated. Besides belonging all to the subfield of macroeconomics, they share the common feature of being inherently economic policy oriented.



The title of the first article is "Fiscal Policy and Private Consumption in Industrial and Developing Countries" and has been accepted for publication in the Journal of Macroeconomics (tentatively scheduled for Volume 29, Number 4 (December 2007)).



It empirically studies the effects of fiscal policy shocks on private consumption. Further, it investigates if... (More)
This thesis consists of three distinct articles that can be read separately. Each one has been awarded a chapter of its own. The independence of these chapters should not be taken as meaning that they are unrelated. Besides belonging all to the subfield of macroeconomics, they share the common feature of being inherently economic policy oriented.



The title of the first article is "Fiscal Policy and Private Consumption in Industrial and Developing Countries" and has been accepted for publication in the Journal of Macroeconomics (tentatively scheduled for Volume 29, Number 4 (December 2007)).



It empirically studies the effects of fiscal policy shocks on private consumption. Further, it investigates if the initial financing needs of the government or previous fiscal deficits affect that relationship. I use yearly data between 1970 and 2000 for forty countries, of which 19 are industrialized and 21 are underdeveloped. In general, the estimation results seem to indicate that government consumption shocks have Keynesian effects for both industrial and underdeveloped countries. In the case of tax shocks, the evidence is mixed. Furthermore, there is no evidence that favor the hypothesis of expansionary fiscal consolidations (non-Keynesian effects).



"Debt and Economic Growth in Developing and Industrial Countries" is the title of this, second, article. It empirically explores the relationship between debt and growth for a number of underdeveloped and industrial economies. For underdeveloped countries, we find that lower total external debt levels are associated with higher growth rates, and that this negative relationship is driven by the incidence of public external debt, and not by private external debt. Regarding the channels through which debt accumulation affects growth, we find that this is mainly driven by inhibiting capital accumulation. We find only a weak connection between external debt and total factor productivity growth. In the case of private savings rates, the results are mixed. In addition, we do not find any support for an inverted-U shape relationship between external debt and growth. For industrial countries, we do not find any significant relationship between gross government debt and economic growth.



The title of the third article is "Industry Diversification, Financial Development and Productivity-Enhancing Investments". It theoretically studies the role of the financial system in promoting macroeconomic stability and growth. It also explains endogenously the development of the financial system as part of the growth process. The productive sector engages in R&D activities, and finances its activities through access to the financial system. While vertical innovation spurs economic growth, horizontal innovation creates new industry sectors, and thus enhances industry diversification. Higher industry diversification deepens the financial system by improving its ability to finance the productive sector. Economies that are more diversified, and thus more financially developed, have higher growth rates and are less volatile. There is a role for the government to subsidize innovation, especially horizontal innovation. (Less)
Abstract (Swedish)
Popular Abstract in Swedish

Denna avhandling består av tre olika artiklar som kan läsas separat. Varje artikel har tilldelats ett eget kapitel i avhandlingen. Självständigheten av dessa kapitel bör inte tolkas som att de inte hör ihop. Förutom att alla tillhör området makroekonomi, har alla den gemensamma egenskapen att relatera till nutida ekonomisk politiska debatten.



Titeln på den första artikeln är ?Fiscal Policy and Private Consumption in Industrial and Developing Countries?. Denna artikel har accepterats för publicering i Journal of Macroeconomics (Volume 29, Number 4 (December 2007)). Det är en empirisk studie av effekten som finanspolitiska åtgärder har på privat konsumtion. Den utforskar även om... (More)
Popular Abstract in Swedish

Denna avhandling består av tre olika artiklar som kan läsas separat. Varje artikel har tilldelats ett eget kapitel i avhandlingen. Självständigheten av dessa kapitel bör inte tolkas som att de inte hör ihop. Förutom att alla tillhör området makroekonomi, har alla den gemensamma egenskapen att relatera till nutida ekonomisk politiska debatten.



Titeln på den första artikeln är ?Fiscal Policy and Private Consumption in Industrial and Developing Countries?. Denna artikel har accepterats för publicering i Journal of Macroeconomics (Volume 29, Number 4 (December 2007)). Det är en empirisk studie av effekten som finanspolitiska åtgärder har på privat konsumtion. Den utforskar även om regeringens initiala finansiering behov eller föregående budgetunderskott påverkar relationen mellan finanspolitik och privat konsumtion. Vi använder årlig data mellan 1970 och 2000 för 40 länder, var av 19 är industrialiserade och 21 är underutvecklade. Resultaten visar att statliga utgiftschocker har ?Keynesianska? effekter för både i- och u-länder. Resultatet för skattechocker är inte entydig. Dessutom finns det inga bevis som stödjer hypotesen om ?icke-Keynesianska? effekter.



"Debt and Economic Growth in Developing and Industrial Countries" är titeln på den andra artikeln. Den behandlar empiriska relationen mellan skuld och tillväxt för ett antal i- och u-länder. För u-länder, finner vi att lägre nivåer på totala utlandsskulden innebär en högre tillväxttakt. Den negativa relationen drivs av den offentliga utlandsskulden, och inte av den privata utlandsskulden. Angående kanalerna genom vilka skuldackumulering påverkar tillväxt, finner vi att den drivs främst genom att förhindra kapitalackumulering. Vi hittar endast en svag koppling mellan utlandsskulden och totala faktor produktivitetstillväxten. I fallet för privat sparande är resultaten inte entydiga. Vi hittar inga bevis som stödjer en inverterad U relation mellan utlandsskuld och tillväxt. För industriella länder, hittar vi inte något samband mellan statsskuld och ekonomisk tillväxt.



Titeln på den tredje artikeln är ?Industry Diversification, Financial Development and Productivity-Enhancing Investments". Det är en teoretisk studie om hur finansiella systemet främjar makroekonomisk stabilitet och tillväxt. Den förklarar även finansiella systemets utveckling som en endogen del av tillväxt processen. Industri sektorn utför FoU aktiviteter, och finansierar dessa aktiviteter genom finansiella systemet. Medan vertikal innovation sporrar ekonomisk tillväxt, skapar horisontell innovation nya branschsektorer, och leder därför till högre sektor diversifiering. Högre sektor diversifiering fördjupar det finansiella systemet genom att förbättra dess kapacitet att finansiera den produktiva sektorn. Ekonomier som är mer diversifierade, och har därför mer utvecklade finansiella system, har högre tillväxttakt och mindre volatilitet. Det finns även en roll för att staten ska subventionera innovation, speciellt horisontell innovation. (Less)
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keywords
private consumption, Ekonomisk planering, Handel, Economic planning, imperfect information, Trade, financial development, economic growth, capital accumulation, productivity growth, private savings rate, vertical innovation, horizontal innovation, industry diversification, public debt, external debt, developing countries, taxation, government expenditure, fiscal policy
in
Lund Economic Studies
volume
136
pages
119 pages
publisher
Department of Economics, Lund University
defense location
N/A
defense date
2006-12-05 10:00:00
ISSN
0460-0029
language
English
LU publication?
yes
id
d8794898-2cbb-4d4e-9076-d448bc152753 (old id 547502)
date added to LUP
2016-04-01 15:24:05
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2019-05-21 16:32:30
@phdthesis{d8794898-2cbb-4d4e-9076-d448bc152753,
  abstract     = {This thesis consists of three distinct articles that can be read separately. Each one has been awarded a chapter of its own. The independence of these chapters should not be taken as meaning that they are unrelated. Besides belonging all to the subfield of macroeconomics, they share the common feature of being inherently economic policy oriented.<br/><br>
<br/><br>
The title of the first article is "Fiscal Policy and Private Consumption in Industrial and Developing Countries" and has been accepted for publication in the Journal of Macroeconomics (tentatively scheduled for Volume 29, Number 4 (December 2007)).<br/><br>
<br/><br>
It empirically studies the effects of fiscal policy shocks on private consumption. Further, it investigates if the initial financing needs of the government or previous fiscal deficits affect that relationship. I use yearly data between 1970 and 2000 for forty countries, of which 19 are industrialized and 21 are underdeveloped. In general, the estimation results seem to indicate that government consumption shocks have Keynesian effects for both industrial and underdeveloped countries. In the case of tax shocks, the evidence is mixed. Furthermore, there is no evidence that favor the hypothesis of expansionary fiscal consolidations (non-Keynesian effects).<br/><br>
<br/><br>
"Debt and Economic Growth in Developing and Industrial Countries" is the title of this, second, article. It empirically explores the relationship between debt and growth for a number of underdeveloped and industrial economies. For underdeveloped countries, we find that lower total external debt levels are associated with higher growth rates, and that this negative relationship is driven by the incidence of public external debt, and not by private external debt. Regarding the channels through which debt accumulation affects growth, we find that this is mainly driven by inhibiting capital accumulation. We find only a weak connection between external debt and total factor productivity growth. In the case of private savings rates, the results are mixed. In addition, we do not find any support for an inverted-U shape relationship between external debt and growth. For industrial countries, we do not find any significant relationship between gross government debt and economic growth.<br/><br>
<br/><br>
The title of the third article is "Industry Diversification, Financial Development and Productivity-Enhancing Investments". It theoretically studies the role of the financial system in promoting macroeconomic stability and growth. It also explains endogenously the development of the financial system as part of the growth process. The productive sector engages in R&amp;D activities, and finances its activities through access to the financial system. While vertical innovation spurs economic growth, horizontal innovation creates new industry sectors, and thus enhances industry diversification. Higher industry diversification deepens the financial system by improving its ability to finance the productive sector. Economies that are more diversified, and thus more financially developed, have higher growth rates and are less volatile. There is a role for the government to subsidize innovation, especially horizontal innovation.},
  author       = {Schclarek Curutchet, Alfredo},
  issn         = {0460-0029},
  language     = {eng},
  publisher    = {Department of Economics, Lund University},
  school       = {Lund University},
  series       = {Lund Economic Studies},
  title        = {Essays on Fiscal Policy, Public Debt and Financial Development},
  volume       = {136},
  year         = {2006},
}