ACADEMY OF ECONOMIC STUDIES DOCTORAL SCHOOL OF FINANACE AND BANKING DISSERTATION PAPER Student: RACARU IRINA Supervisor:MOISĂ ATLĂR, Ph.D BUCHAREST, JULY.

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ACADEMY OF ECONOMIC STUDIES DOCTORAL SCHOOL OF FINANACE AND BANKING DISSERTATION PAPER Student: RACARU IRINA Supervisor:MOISĂ ATLĂR, Ph.D BUCHAREST, JULY 2001 The Effects of Fiscal Policy on Economic Growth

FISCAL POLICY ECONOMIC GROWTH ▪ taxation ▪ government spending The Effects of Fiscal Policy on Economic Growth ▪ neoclassic ▪ endogenous

CONDITIONAL CONVERGENCE The Effects of Fiscal Policy on Economic Growth

1.THE EFFECTS OF TAXATION The Effects of Fiscal Policy on Economic Growth 2.THE EFFECTS OF GOVERNMENT SPENDING

The Effects of Fiscal Policy on Economic Growth withandfor

THE EMPIRICAL EVIDENCE The Effects of Fiscal Policy on Economic Growth ▪ cross section ▪ pool Barro(1990) - negative effect of the government consumption Easterly and Rebelo (1993) - pozitive effect of the public investment

The Effects of Fiscal Policy on Economic Growth

Source: World Bank Indicators The variables:

The Effects of Fiscal Policy on Economic Growth

The Augmented Dickey Fuller test

The Effects of Fiscal Policy on Economic Growth

LOGCONS LOGGDPGRUSD LOGPBLINV LOGGDPGRUSD MIDDLE LOGPBLINV LOGGDPGRUSD LOW LOGCONS LOGGDPGRUSD The Effects of Fiscal Policy on Economic Growth

THE EFFECTS OF GOVERNMENT SPENDING ON INDUSTRIAL PRODUCTION - The Romanian Case The Effects of Fiscal Policy on Economic Growth The variables: Source: National Bank of Romania

The Effects of Fiscal Policy on Economic Growth

The Augmented Dickey Fuller test

The Johansen cointagration test The Effects of Fiscal Policy on Economic Growth For the PROD-INV relation:

The Effects of Fiscal Policy on Economic Growth PROD t = 2,211·INV t + u t (29,06) ΔPRODt = -0,132·ΔPRODt-1 - 0,083·ΔPRODt-2 -0,049·ΔINVt-1 (-1,769) (1,074) (-2,530) - 0,080·ΔINVt-2 -0,122·SEAS(12) - 0,004·ut-1 + εt (-5,065) (-6,690) (-0,481) ΔINVt = 1,302·ΔPRODt-1 + 0,212·ΔPRODt-2 -0,404·ΔINVt-1 (3,705) (0,581) (-4,375) - 0,667·ΔINVt-2 +0,483·SEAS(12) +0,154·ut-1 + εt (-3,573) (5,592) (3,665)

The Effects of Fiscal Policy on Economic Growth

For 5 years

The Effects of Fiscal Policy on Economic Growth For the PROD - INVEST, CONS relation: The Johansen cointagration test

The Effects of Fiscal Policy on Economic Growth PROD t = 1,041·INVEST t +0,668·CONS t + u t (11,69) (8,244) ΔPRODt = -0,092·ΔPRODt-1 -0,033·ΔPRODt-2 -0,054·ΔINVESTt-1 (-1,185) (-0,432) (-2,473) - 0,079·ΔINVESTt-2 -0,056·CONSt-1 -0,039·CONSt-2 (-4,394) (-2,305) (-1,726) -0,122·SEAS(12) - 0,033·ut-1 + εt (-6,874) (-1,655)

The Effects of Fiscal Policy on Economic Growth ΔINVESTt = 0,836·ΔPRODt-1+0,237·ΔPRODt-2 -0,264·ΔINVESTt-1 (2,344) (0,668) (-2,637) - 0,185·ΔINVESTt-2 -0,011·CONSt-1 +0,053·CONSt-2 (-2,240) (-0,103) (0,501) +0,439·SEAS(12) + 0,435·ut-1 + εt (5,409) (4,816) ΔCONSt = 0,601·ΔPRODt-1 +0,379·ΔPRODt-2 +0,149·ΔINVESTt-1 (2,290) (1,450) (2,026) +0,142·ΔINVESTt-2 -0,642·CONSt-1 -0,517·CONSt-2 (2,340) (-7,806) (-6,689) +0,380·SEAS(12) +0,214·ut-1 + εt (6,374) (3,219)

The Effects of Fiscal Policy on Economic Growth

Response to One S.D. Innovations The Effects of Fiscal Policy on Economic Growth For 5 years