Scandinavian Working Papers in Economics
Working Papers,
Lund University, Department of Economics
No 1999:3: The 'German View' and Consumption Booms: Empirical Evidence from Denmark
U. Michael Bergman (michael.bergman@econ.ku.dk) and Michael M. Hutchison (hutch@cats.ucsc.edu)
Additional contact information
U. Michael Bergman: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Michael M. Hutchison: Department of Economics, University of California Santa Cruz, Postal: Department of Economics, Social Sciences 1, University of California, Santa Cruz, CA 95064
Abstract: We develop an alternative test of the `German view' - that a reduction in government consumption may lead to an immediate private consumption boom - derived from an open-economy permanent income model. In our empirical study we find, in accordance with the `German view', that an anticipated permanent reduction of government consumption is associated with a strong short-run (and permanent) increase in private consumption. However, the Danish experience following the fiscal contraction in 1982 suggest that this was not a dominant factor behind the private consumption boom. Our evidence shows instead that other factors increasing permanent income, including a substantial terms-of-trade improvement, were much more important.
Keywords: Expansionary fiscal contraction; German view; consumption booms; structural shocks
17 pages, March 15, 1999
Full text files
lunewp1999_003.ps.zip PostScript file Full text
lunewp1999_003.ps PostScript file Full text
lunewp1999_003.pdf.zipFull text
lunewp1999_003.pdf
Questions (including download problems) about the papers in this series should be directed to Iker Arregui Alegria (wp-editor@nek.lu.se)
Report other problems with accessing this service to Sune Karlsson (sune.karlsson@oru.se).
RePEc:hhs:lunewp:1999_003This page generated on 2024-09-13 22:16:09.