1. 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

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

3. CONDITIONAL CONVERGENCE The Effects of Fiscal Policy on Economic Growth

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

5. The Effects of Fiscal Policy on Economic Growth withandfor

6. 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

7. The Effects of Fiscal Policy on Economic Growth

8. Source: World Bank Indicators The variables:

9. The Effects of Fiscal Policy on Economic Growth

10. The Augmented Dickey Fuller test

11. The Effects of Fiscal Policy on Economic Growth

18. -0.15 -0.10 -0.05 0.00 0.05 0.10 -4-3-20 LOGCONS LOGGDPGRUSD -0.15 -0.10 -0.05 0.00 0.05 0.10 -5-4-3-20 LOGPBLINV LOGGDPGRUSD MIDDLE -0.02 0.00 0.02 0.04 0.06 0.08 0.10 -4-3-20 LOGPBLINV LOGGDPGRUSD LOW -0.02 0.00 0.02 0.04 0.06 0.08 0.10 -4-3-20 LOGCONS LOGGDPGRUSD The Effects of Fiscal Policy on Economic Growth

19. 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

20. The Effects of Fiscal Policy on Economic Growth

21. The Augmented Dickey Fuller test

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

23. 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)

24. The Effects of Fiscal Policy on Economic Growth

26. For 5 years

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

28. 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)

29. 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)

30. The Effects of Fiscal Policy on Economic Growth

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