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Budget deficits and economic activity

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  • G. Vamvoukas

Abstract

Using annual data of the Greek economy, this paper explores the relationship between budget deficits and real output. The ultimate purpose is to empirically evaluate the validity of the Keynesian proposition and the Ricardian equivalence hypothesis. The econometric methodology is based on error-correction modeling, Granger bivariate and trivariate causality, and Hendry's general-to-specific technique. The ECM results are consistent with the Keynesian proposition, suggesting a significant and positive relationship between budget deficits and real GNP. Copyright International Atlantic Economic Society 1999

Suggested Citation

  • G. Vamvoukas, 1999. "Budget deficits and economic activity," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(1), pages 65-73, February.
  • Handle: RePEc:kap:iaecre:v:5:y:1999:i:1:p:65-73:10.1007/bf02295032
    DOI: 10.1007/BF02295032
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    References listed on IDEAS

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    1. Feldstein, Martin, 1982. "Government deficits and aggregate demand," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 1-20.
    2. Barro, Robert J, 1989. "The Ricardian Approach to Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 37-54, Spring.
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    6. Jakob De Haan & H. Dick Zelhorst, 1988. "The Relationship between Real Deficits and Real Growth: A Critique," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 11(1), pages 148-160, September.
    7. Raynold, Prosper, 1994. "The impact of government deficits when credit markets are imperfect: Evidence from the interwar period," Journal of Macroeconomics, Elsevier, vol. 16(1), pages 55-76.
    8. Jakob De Haan & H. Dick Zelhorst & Robert Eisner & Paul J. Pieper, 1988. "The Relationship between Real Deficits and Real Growth: A Critique [with Rejoinder]," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 11(1), pages 148-168, October.
    9. Beard, Thomas R. & McMillin, W. Douglas, 1991. "The impact of budget deficits in the interwar period," Journal of Macroeconomics, Elsevier, vol. 13(2), pages 239-266.
    10. Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-190, March.
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