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Aiming for Growth: Is Fiscal Policy a Hit or Miss? A Peek into the OECD

Linde, Viktor LU and Norman, Valdemar LU (2024) NEKP01 20241
Department of Economics
Abstract
The relationship between government spending and economic growth has captured scholars and policymakers over the years. Despite studies dating back to the early mid-1900s, establishing a clear causal relationship has yet to be discovered. This paper aims to contribute to the ongoing debate on the subject, with the ultimate goal of determining the effectiveness of fiscal policy. Employing a panel-VAR (Vector AutoRegression) technique, the study utilises quarterly data on government spending and economic growth from OECD countries from 1995 to 2023. Furthermore, the analysis is segmented into two subsamples: the post-dot-com era from 2000 to 2006 and the post-financial crisis period from 2009 to 2015. Our findings suggest a negative two-way... (More)
The relationship between government spending and economic growth has captured scholars and policymakers over the years. Despite studies dating back to the early mid-1900s, establishing a clear causal relationship has yet to be discovered. This paper aims to contribute to the ongoing debate on the subject, with the ultimate goal of determining the effectiveness of fiscal policy. Employing a panel-VAR (Vector AutoRegression) technique, the study utilises quarterly data on government spending and economic growth from OECD countries from 1995 to 2023. Furthermore, the analysis is segmented into two subsamples: the post-dot-com era from 2000 to 2006 and the post-financial crisis period from 2009 to 2015. Our findings suggest a negative two-way causality between GDP growth and Government spending from one quarter to the next, suggesting that fiscal policy negatively affects GDP and vice versa. The results do not change significantly between periods. (Less)
Please use this url to cite or link to this publication:
author
Linde, Viktor LU and Norman, Valdemar LU
supervisor
organization
course
NEKP01 20241
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Government Spending, Economic growth, Granger causality, Panel-VAR (Vector AutoRegression), fiscal policy
language
English
id
9156657
date added to LUP
2024-10-01 13:19:24
date last changed
2024-10-01 13:19:24
@misc{9156657,
  abstract     = {{The relationship between government spending and economic growth has captured scholars and policymakers over the years. Despite studies dating back to the early mid-1900s, establishing a clear causal relationship has yet to be discovered. This paper aims to contribute to the ongoing debate on the subject, with the ultimate goal of determining the effectiveness of fiscal policy. Employing a panel-VAR (Vector AutoRegression) technique, the study utilises quarterly data on government spending and economic growth from OECD countries from 1995 to 2023. Furthermore, the analysis is segmented into two subsamples: the post-dot-com era from 2000 to 2006 and the post-financial crisis period from 2009 to 2015. Our findings suggest a negative two-way causality between GDP growth and Government spending from one quarter to the next, suggesting that fiscal policy negatively affects GDP and vice versa. The results do not change significantly between periods.}},
  author       = {{Linde, Viktor and Norman, Valdemar}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Aiming for Growth: Is Fiscal Policy a Hit or Miss? A Peek into the OECD}},
  year         = {{2024}},
}