Munich Personal RePEc Archive

Growth Accelerations: The Role of Government Expenditures and Revenues

Parekh, Saahil and Pandey, Manish (2012): Growth Accelerations: The Role of Government Expenditures and Revenues.

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Using episodes of growth spells, we attempt to resolve the issue of endogeneity by examining differences in fiscal policies before and after the start of the spell. In doing so, we seek to answer the question of whether governments change fiscal policies in response to growth accelerations or whether such changes happen prior to start of growth spells. We use statistically significant growth spells identified by Berg et al. (2011) for our analysis. We find a positive long run trend growth for aggregate ratios of government expenditures and revenues to GDP. However, we find no evidence that the growth of the variables in the pre-period or the post-period differed from their long run trend growth rate.

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