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Government Size, Fiscal Policy and the Level and Growth of Output: A Review of Recent Evidence

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  • Gemmell, Norman
  • Au, Joey

Abstract

Theoretical developments, improved methodologies and more extensive data have helped generate a dramatic increase in the literature testing for the impact of government size and fiscal policy on economic growth in recent years. We review a range of the more recent evidence and examine (1) the consistency or robustness of the results; (2) how these results differ from the earlier literature and (3) their usefulness as a guide to policy reform in practice. We find that the last decade has produced more robust evidence and more plausible orders of magnitude on the impact of fiscal policy on growth. However, the value of this evidence remains limited as a basis for quantifying macroeconomic responses to fiscal policy reform in practice.

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  • Gemmell, Norman & Au, Joey, 2012. "Government Size, Fiscal Policy and the Level and Growth of Output: A Review of Recent Evidence," Working Paper Series 18755, Victoria University of Wellington, Chair in Public Finance.
    • Handle: RePEc:vuw:vuwcpf:18755
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    3. Zimčík Petr, 2016. "Economic Growth and Budget Constraints: EU Countries Panel Data Analysis," Review of Economic Perspectives, Sciendo, vol. 16(2), pages 87-101, June.
    4. Sabina Hodžiæ & Amer Demiroviæ & Emira Beèiæ, 2020. "The relationship between fiscal policy and economic growth in CEE countries," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 38(2), pages 653-666.
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