Corresponding author: Norman Gemmell, Chief Economist, New Zealand Treasury, PO Box 3724, Wellington 6140, New Zealand. Email: email@example.com.
The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD Countries*
Article first published online: 1 FEB 2011
© 2011 The Author(s). The Economic Journal © 2011 Royal Economic Society
The Economic Journal
Volume 121, Issue 550, pages F33–F58, February 2011
How to Cite
Gemmell, N., Kneller, R. and Sanz, I. (2011), The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD Countries. The Economic Journal, 121: F33–F58. doi: 10.1111/j.1468-0297.2010.02414.x
We are grateful to Bob Reed, Peren Arin and a referee of this Journal, for helpful comments on an earlier draft of this article, and to seminar participants at the Universities of Oxford (UK), Canterbury and Massey (New Zealand) and Oregon (US).
- Issue published online: 1 FEB 2011
- Article first published online: 1 FEB 2011
The literatures testing for aggregate short-run or long-run growth impacts of fiscal policy use quite different methodologies. The former generally focuses on temporary fiscal ‘shocks’; the latter typically have no short-run dynamics or assume homogeneity. We use regression methods that treat heterogeneous short-run dynamics explicitly within a long-run model. Results suggest that previously estimated ‘long-run’ growth effects of fiscal policy are typically achieved quickly, consistent with results from short-run models. In principle these short-run effects ‘persist’; in practice regular fiscal policy changes in OECD countries mean that persistent increases or decreases in growth rates are rare.