Government size and output volatility : is there a relationship?
Virén, Matti (05.03.2005)
Numero
8/2005Julkaisija
Bank of Finland
2005
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201501291025Tiivistelmä
This paper provides some further tests for the proposition that a
larger public sector leads to smaller output volatility. Both Gali
and Fatas & Mihov have provided some evidence which appears to
support this proposition. Their evidence is, however, based on a
relatively small sample of countries. In this study, we go beyond
the OECD sample and focus on a much larger World Bank data set
covering up to 208 countries for the period 1960-2002.We also seek
to utilise some time series aspects of the material by using pooled
cross-section time series data. Tests with different models and
measures clearly indicate that the original results are not very
robust and the relationship between government size and output
volatility is either nonexistent or very weak at best.
Key words: government, fiscal policy, automatic stabilisers
JEL classification numbers: E62, H30, E32
larger public sector leads to smaller output volatility. Both Gali
and Fatas & Mihov have provided some evidence which appears to
support this proposition. Their evidence is, however, based on a
relatively small sample of countries. In this study, we go beyond
the OECD sample and focus on a much larger World Bank data set
covering up to 208 countries for the period 1960-2002.We also seek
to utilise some time series aspects of the material by using pooled
cross-section time series data. Tests with different models and
measures clearly indicate that the original results are not very
robust and the relationship between government size and output
volatility is either nonexistent or very weak at best.
Key words: government, fiscal policy, automatic stabilisers
JEL classification numbers: E62, H30, E32
Julkaisuhuomautus
Published in International economics, 57 ; 3 ; 2004.