Cyclical Budgetary Policy and Economic Growth: What Do We Learn from OECD Panel

2007_8_aghion.pdf444 KB


This paper uses yearly panel data on OECD countries to analyze the relationship between growth and the cyclicality of government debt. We develop new time-varying estimates of the cyclicality of public debt. Our main findings can be summarized as follows: (i) less procyclical public debt growth can have significantly positive effects on productivity growth, in particular when financial development is lower; (ii) public debt growth has become increasingly countercyclical in most OECD countries over the past twenty years, but this trend has been less pronounced in the EMU; (iii) less financially developed or more open economies display less countercyclical public debt growth.


WCFIA Working Paper 07-08, June 2006

Last updated on 03/22/2015