Working Papers, Department of Economics, Lund University
Martin Johansson and Kristian Jönsson
Public debt and the effects of government expenditure on private consumption - A Kalman filter analysis of the Swedish experience 1970-1997
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.
Keywords: Government expenditure; private consumption; time-varying parameters; (follow links to similar papers)
JEL-Codes: E12; E21; E62; (follow links to similar papers)
18 pages, April 3, 2003
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