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The effect of fiscal shock on inflation and economic growth in developing countries
[journal article]
Abstract This paper examines the effect of fiscal policy on economic growth and inflation by using government expenditure and taxes. For this purpose, selected data from developing countries is used for the period 1990-2011. PVAR approach has been applied to study the effect of shocks on macro variables. The... view more
This paper examines the effect of fiscal policy on economic growth and inflation by using government expenditure and taxes. For this purpose, selected data from developing countries is used for the period 1990-2011. PVAR approach has been applied to study the effect of shocks on macro variables. The results of impulse response function and variance decomposition implies that economic growth will increase through government expenditure shock in short term, but in long term it is the opposite. The government expenditure shock decrease inflation. Shock of taxes, in short run, promotes slightly economic growth and in long term have no effect on growth. Moreover, at the beginning of the period, inflation is reduced following total tax shocks, but it slightly is increased in subsequent periods.... view less
Keywords
developing country; fiscal policy; impact; inflation; economic growth; expenditures; national state; public expenditures; taxes; panel; data
Classification
Economic Policy
Sociology of Developing Countries, Developmental Sociology
Public Finance
Document language
English
Publication Year
2014
Page/Pages
p. 184-191
Journal
International Letters of Social and Humanistic Sciences (2014) 41
DOI
https://doi.org/10.18052/www.scipress.com/ILSHS.41.184
ISSN
2300-2697
Status
Published Version; peer reviewed