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Is private consumption growth higher (lower) during periods of fiscal contractions (expansions)?

Hjelm, Göran LU (2002) In Journal of Macroeconomics 24(1). p.17-39
Abstract
Case studies have claimed that private consumption growth is higher during fiscal contractions due to the very fact that government spending is cut. Indeed, neoclassical theory has this implication. This paper uses regression analysis of a panel of 19 OECD countries and shows that this is not true in general. On the contrary, contraction (expansion) periods experience lower (higher) private consumption growth which questions the generality of the findings in case studies. We find, instead, that preceding exchange rate movements have a significant effect on the private consumption response of fiscal contractions which highlights a rather different expectational channel. (C) 2002 Elsevier Science Inc. All rights reserved.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
panel data, private consumption, fiscal policy, fiscal contractions and expansions
in
Journal of Macroeconomics
volume
24
issue
1
pages
17 - 39
publisher
LOUISIANA STATE UNIV PR
external identifiers
  • wos:000177600800002
  • scopus:0035997750
ISSN
1873-152X
DOI
10.1016/S0164-0704(02)00013-7
language
English
LU publication?
yes
id
4cd7faf2-e309-494f-977a-c0323e5b8f51 (old id 892725)
date added to LUP
2008-01-23 11:21:54
date last changed
2017-11-26 03:20:21
@article{4cd7faf2-e309-494f-977a-c0323e5b8f51,
  abstract     = {Case studies have claimed that private consumption growth is higher during fiscal contractions due to the very fact that government spending is cut. Indeed, neoclassical theory has this implication. This paper uses regression analysis of a panel of 19 OECD countries and shows that this is not true in general. On the contrary, contraction (expansion) periods experience lower (higher) private consumption growth which questions the generality of the findings in case studies. We find, instead, that preceding exchange rate movements have a significant effect on the private consumption response of fiscal contractions which highlights a rather different expectational channel. (C) 2002 Elsevier Science Inc. All rights reserved.},
  author       = {Hjelm, Göran},
  issn         = {1873-152X},
  keyword      = {panel data,private consumption,fiscal policy,fiscal contractions and expansions},
  language     = {eng},
  number       = {1},
  pages        = {17--39},
  publisher    = {LOUISIANA STATE UNIV PR},
  series       = {Journal of Macroeconomics},
  title        = {Is private consumption growth higher (lower) during periods of fiscal contractions (expansions)?},
  url          = {http://dx.doi.org/10.1016/S0164-0704(02)00013-7},
  volume       = {24},
  year         = {2002},
}