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Growth Accelerations: The Role of Government Expenditures and Revenues

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  • Parekh, Saahil
  • Pandey, Manish

Abstract

Using episodes of growth spells, we attempt to resolve the issue of endogeneity by examining differences in fiscal policies before and after the start of the spell. In doing so, we seek to answer the question of whether governments change fiscal policies in response to growth accelerations or whether such changes happen prior to start of growth spells. We use statistically significant growth spells identified by Berg et al. (2011) for our analysis. We find a positive long run trend growth for aggregate ratios of government expenditures and revenues to GDP. However, we find no evidence that the growth of the variables in the pre-period or the post-period differed from their long run trend growth rate.

Suggested Citation

  • Parekh, Saahil & Pandey, Manish, 2012. "Growth Accelerations: The Role of Government Expenditures and Revenues," MPRA Paper 66343, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:66343
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    References listed on IDEAS

    as
    1. Berg, Andrew & Ostry, Jonathan D. & Zettelmeyer, Jeromin, 2012. "What makes growth sustained?," Journal of Development Economics, Elsevier, vol. 98(2), pages 149-166.
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    3. Pritchett, Lant, 2000. "Understanding Patterns of Economic Growth: Searching for Hills among Plateaus, Mountains, and Plains," The World Bank Economic Review, World Bank, vol. 14(2), pages 221-250, May.
    4. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 126-150, October.
    5. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    6. Jerzmanowski, Michal, 2006. "Empirics of hills, plateaus, mountains and plains: A Markov-switching approach to growth," Journal of Development Economics, Elsevier, vol. 81(2), pages 357-385, December.
    7. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    8. Michael Bleaney & Norman Gemmell & Richard Kneller, 2001. "Testing the endogenous growth model: public expenditure, taxation, and growth over the long run," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 36-57, February.
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    More about this item

    Keywords

    Government expenditure; endogenous growth; government revenues;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H0 - Public Economics - - General
    • H00 - Public Economics - - General - - - General

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