The Cyclical and Long-Term Behavior of Government Expenditures in Developing Countries

Author/Editor:

Gabriela Inchauste ; Bernardin Akitoby ; Benedict J. Clements ; Sanjeev Gupta

Publication Date:

October 1, 2004

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We examine the short- and long-term movements of government spending relative to output in 51 countries. We find that in the short term, the main components of government spending increase with output in about half of the sample countries, with some variation across spending categories and countries. Further, we find that there is a long-term relationship between government spending and output (in line with "Wagner's law") for the majority of countries for at least one spending aggregate. In the short term, we find that power dispersion and government size typically dampen the positive response of government spending to output. Output volatility and financial risk, on the other hand, contribute to the procylicality of government spending.

Series:

Working Paper No. 04/202

Subject:

English

Publication Date:

October 1, 2004

ISBN/ISSN:

9781451874433/1018-5941

Stock No:

WPIEA2022004

Format:

Paper

Pages:

24

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