Expansionary Fiscal Contractions? Evidence from Panel Data
نویسنده
چکیده
We examine the ability of the Expansionary Fiscal Contraction (EFC) hypothesis to explain the performance of of OECD economies during times of crisis. We ̄nd some limited evidence in its favour: if public consumption is reduced in response to a ̄scal crisis (as de ̄ned by a high level of debt), private consumption does seem to increase. However the size of the e®ect is smaller than that typically found in similar studies. Furthermore, the increase in private consumption is not usually su±cient to o®set the direct e®ect of a reduction in the public consumption on output{ ̄scal contractions are not literally expansionary. JEL Classi ̄cation: E21, E62
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