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ECONOMIC GROWTH AND THE EFFECTS OF FISCAL POLICY
Author(s) -
Day Richard H.,
Yang Chengyu
Publication year - 2011
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2010.04108.x
Subject(s) - economics , fiscal policy , marginal propensity to consume , macroeconomics , government spending , balance (ability) , consumption (sociology) , monetary economics , production (economics) , market economy , medicine , social science , sociology , market liquidity , welfare , physical medicine and rehabilitation
The macroeconomic effects of fiscal policy are analyzed using a Keynesian growth model. Comparative static analysis shows that the long‐run effects of an increase in public spending and a decrease in taxation on economic growth and government budget balance depend on the relative size of marginal propensity to consume and invest and could be positive under certain conditions. Empirical estimates show that consumption and production structure have changed significantly from 1930s to 2007; both positive and negative effects on growth and budget balance of the same fiscal policy are found in different time periods.