How does fiscal policy affect Investment? Evidence from a large panel

António Afonso, João Tovar Jalles

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)310-327
Number of pages18
JournalInternational Journal of Finance and Economics
Volume20
Issue number4
DOIs
Publication statusPublished - 1 Jan 2015

Keywords

  • Budgetary decomposition
  • Fiscal-rules
  • Non-linearities
  • Panel analysis

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