Fiscal Stabilization and Growth: Evidence from Industry-level Data for Advanced and Developing Economies
IMF Working Papers, September 5, 2017
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- Fiscal Stabilization and Growth: Evidence from Industry-level Data for Advanced and Developing Economies
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Bibliographic details
- Authors: Sangyup Choi, Davide Furceri, João Tovar Jalles
- Published: September 5, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484316726.001
Summary
- Medium-term growth can be enhanced by fiscal stabilization.
- This paper examines the effect of fiscal stabilization on industrial growth and how this effect depends on different technological characteristics.
- Authors: Sangyup Choi, Davide Furceri, João Tovar Jalles.
- Date: September 5, 2017.
- Format: IMF Working Papers.
Methodology
- Empirical approach: difference-in-difference.
- Dataset: an unbalanced panel of 22 manufacturing industries for 55 advanced and developing economies over the period 1970-2014.
- Dependent and independent variables: industry-level growth outcomes interacted with measures of fiscal stabilization and technological characteristics (as described in the paper).
Key findings
- Fiscal stabilization fosters growth in industries with:
- higher external financial dependence and lower asset fixity;
- higher degree of labor intensity;
- higher investment lumpiness and relationship-specific input usage.
- These effects tend to be larger during economic recessions.
- Results are robust to different measures of fiscal stabilization and the inclusion of various interactions between a broad set of macroeconomic variables and production technologies.
Subjects and keywords
- Subject: Depreciation, Fiscal policy, Fiscal stabilization, Labor, National accounts, Production, Productivity.
- Keywords: aggregate demand, asset fixity, baseline result, capital depreciation, dependent variable, Depreciation, developing economy, differential effect, effect of fiscal stabilization, external finance, fiscal stabilization, Global, growth, industry-level data, interaction effect, option-value effect, Productivity, technologies of production, time varying coefficients, WP.