ACADEMY OF ECONOMIC STUDIES DOCTORAL SCHOOL OF FINANACE AND BANKING DISSERTATION PAPER Student: RACARU IRINA Supervisor:MOISĂ ATLĂR, Ph.D BUCHAREST, JULY 2001 The Effects of Fiscal Policy on The Effects of Fiscal Policy on Economic Growth Economic Growth
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ACADEMY OF ECONOMIC STUDIES DOCTORAL SCHOOL OF FINANACE AND BANKING DISSERTATION PAPER Student: RACARU IRINA Supervisor:MOISĂ ATLĂR, Ph.D BUCHAREST, JULY.
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ACADEMY OF ECONOMIC STUDIES
DOCTORAL SCHOOL OF FINANACE AND BANKING
DISSERTATION PAPER
Student: RACARU IRINA
Supervisor:MOISĂ ATLĂR, Ph.D
BUCHAREST, JULY 2001
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth
FISCAL POLICY
ECONOMIC GROWTH
▪ taxation
▪ government spending
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth
▪ neoclassic
▪ endogenous
CONDITIONAL CONVERGENCE
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth
titititi
Tti Xyby
y
T ,,,,
, loglog1
1. THE EFFECTS OF TAXATION
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth
2. THE EFFECTS OF GOVERNMENT SPENDING
Stokey and Rebelo (1995), Milesi-Ferretti and Roubini (1998), Cassou and Lansing (2001)
Krichel and Levine (1996)Bajo-Rubio, Diaz-Roldan and Monaverez-Garces (1999),Turnovski (1999)
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth
t
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KgHKLAKgKHLF 1)(),,,(
ttkt KYsdK zt
t eAA 0
0
00
lnln1
ln1
ln1
ln1
ln1lnln
yss
sznAt
e
t
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0),,,( KgKHLFK0),,,( KgKHLFKK
α > γ α+β<1with and for
THE EMPIRICAL EVIDENCE
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth
▪ cross section
▪ pool
Barro(1990) - negative effect of the government consumption
Easterly and Rebelo (1993) - pozitive effect of the public investment
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic GrowthNo. Cod Country name No. Cod Country name No. Cod Country name
1 H AUS Australia 20 M SLV El Salvador 39 H NZL New Zealand
2 L BGD Bangladesh 21 L GMB Gambia, The 40 L NIC Nicaragua
3 M BLZ Belize 22 M GTM Guatemala 41 L PAK Pakistan
4 L BEN Benin 23 L GNB Guinea-Bissau 42 M PAN Panama
5 M BOL Bolivia 24 L IND India 43 M PNG Papua New Guinea
6 M BRA Brazil 25 L IDN Indonesia 44 M PRY Paraguay
7 M BGR Bulgaria 26 M IRN Iran, Islamic Rep. 45 M PER Peru
8 L KHM Cambodia 27 H JPN Japan 46 M PHL Philippines
9 H CAN Canada 28 L KEN Kenya 47 M POL Poland
10 M CPV Cape Verde 29 L KOR Korea, Rep. 48 M ROM Romania
11 L TCD Chad 30 L MDG Madagascar 49 M ZAF South Africa
12 M CHL Chile 31 L MWI Malawi 50 H SWE Sweden
13 L CHN China 32 M MYS Malaysia 51 M THA Thailand
14 M COL Colombia 33 L MRT Mauritania 52 M TUN Tunisia
15 M CRI Costa Rica 34 M MUS Mauritius 53 M TUR Turkey
16 L CIV Cote d'Ivoire 35 M MEX Mexico 54 H GBR United Kingdom
17 M DOM Dominican Republic 36 M MAR Morocco 55 H USA United States
18 M ECU Ecuador 37 M NAM Namibia 56 M URY Uruguay
19 M EGY Egypt, Arab Rep. 38 H NLD Netherlands 57 M VEN Venezuela, RB
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth
Description
LOGGDPGRUSDthe real output growth (at market prices USD, constant 1995)
in logarithm for the period 1995–1996
LOGGDPUSD0the real output (at market prices USD, constant 1995) in
logarithm for 1995
LOGPBLINV the public investments share of GDP in logarithm for 1996
LOGPRVINV the private investments share of GDP in logarithm for 1996
LOGPOP population growth for the period 1995–1996
Source: World Bank Indicators
The variables:
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth
The Effects of Fiscal Policy on Economic GrowthThe Effects of Fiscal Policy on Economic Growth