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Public debt and the effects of government expenditure on private consumption - A Kalman filter analysis of the Swedish experience 1970-1997

Author

Listed:
  • Johansson, Martin

    (Department of Economics, Lund University)

  • Jönsson, Kristian

    (Sveriges Riksbank)

Abstract

Recently, it has been suggested that the effect of government expenditure on private consumption is dependent on the level of public debt. More specifically, a higher public debt implies a less Keynesian response in private consumption. In this paper we investigate if this theory is supported by Swedish data 1970-1997 by estimating a consumption function allowing for time-varying parameters. Our main finding is that the effect of government expenditure has become less Keynesian over time. This coincides with a large increase in public debt, lending support to the theoretical predictions.

Suggested Citation

  • Johansson, Martin & Jönsson, Kristian, 2003. "Public debt and the effects of government expenditure on private consumption - A Kalman filter analysis of the Swedish experience 1970-1997," Working Papers 2003:3, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2003_003
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    References listed on IDEAS

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    More about this item

    Keywords

    Government expenditure; private consumption; time-varying parameters;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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