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How Does Fiscal Policy Affect Investment? Evidence from a Large Panel
Author(s) -
Afonso António,
Jalles João Tovar
Publication year - 2015
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1518
Subject(s) - economics , investment (military) , subsidy , government spending , panel data , monetary economics , fiscal policy , government (linguistics) , consumption (sociology) , public investment , macroeconomics , public economics , econometrics , politics , market economy , social science , linguistics , philosophy , sociology , political science , welfare , law
We assess the relevance of fiscal components for private and public investment using data for a large panel of 95 countries for the period 1970–2008. Accounting for the usual econometric pitfalls, our results suggest a negative effect of government expenditure and of government consumption spending on private investment. Interest payments and subsidies have a negative effect on both types of investment (particularly in emerging economies). Social security spending has a negative effect on private investment for the full and OECD samples, whereas government health spending has a positive and significant impact on private investment. Moreover, stronger fiscal numerical rules decrease public investment. Copyright © 2015 John Wiley & Sons, Ltd.