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Has the Golden Rule of Public Finance Made a difference in the UK

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Abstract

This paper uses the SVAR methodology to investigate the effects of public investment on growth, and more specifically, the effects of the introduction of a golden rule of public finance. We extend the existing literature by estimating a model of the British economy that takes into account long run factors such as public debt accumulation. We find that in such a long run framework, public investment has a significant and permanently positive effect on GDP growth; this result runs counter to the most recent literature on the topic that was limited to a short run specification. We further find, by comparing different subsamples, that the introduction of the golden rule in 1997 strengthened the positive effect of public investment.
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Dates and versions

hal-00972843 , version 1 (03-04-2014)

Identifiers

  • HAL Id : hal-00972843 , version 1
  • SCIENCESPO : 2441/1181

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Jérôme Creel, Paola Veroni, Francesco Saraceno. Has the Golden Rule of Public Finance Made a difference in the UK. 2007. ⟨hal-00972843⟩
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