Working Papers, Department of Economics, Lund University
Fiscal Policy and Private Consumption in Industrial and Developing Countries
Abstract: This paper empirically studies the effects of fiscal
policy shocks on private consumption. Further, it tries to determine if the
initial conditions of the economy, such as the financing needs of the
government or previous fiscal deficits, affect that relationship. We use
yearly data between 1970 and 2000 for forty countries, of which 19 are
industrialized and 21 are developing countries. In general, the estimation
results seem to indicate that government consumption shocks have Keynesian
effects for both industrial and developing countries. In the case of tax
shocks, the evidence is mixed. Furthermore, there is no evidence that favor
the hypothesis of expansionary fiscal consolidations.
Keywords: Fiscal policy; Private consumption; Government expenditure; Taxation; Developing countries; (follow links to similar papers)
JEL-Codes: C33; E21; E62; (follow links to similar papers)
31 pages, December 3, 2003, Revised September 30, 2005
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