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Conference Papers Year : 2006

Estimating the Impact of Public Investment for the United Kingdom: Has the Golden Rule of Public Finance Made a Difference?

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Abstract

This paper uses a SVAR methodology to investigate the effects of public investment on growth, and more specifically, the effects of the introduction of a golden rule. We extend the existing literature by estimating a model of the British economy that takes into account long run factors. This seems necessary when dealing with a multi annual variable like public investment, and its long term effects on public finances through debt accumulation. We find that in such a long run framework investment has significant and permanent positive effects on GDP growth; this result runs counter to 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 this positive effect of public investment.
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Dates and versions

hal-03462186 , version 1 (01-12-2021)

Licence

Attribution - NonCommercial - ShareAlike - CC BY 4.0

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  • HAL Id : hal-03462186 , version 1
  • SCIENCESPO : 2441/2681

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Jérôme Creel, Paola Monperrus-Veroni, Francesco Saraceno. Estimating the Impact of Public Investment for the United Kingdom: Has the Golden Rule of Public Finance Made a Difference?. Banca d’Italia workshop on Fiscal Indicators, Banca d’Italia, Mar 2006, Perugia, Italy. pp.373 - 402. ⟨hal-03462186⟩
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