Cyclical fiscal policy,credit constraints,and industry growth |
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| Affiliation: | 1. Harvard University, USA;2. Bank of International Settlements, Switzerland;3. INSEAD, France;1. Paris School of Economics, University of Paris 1 Panthéon-Sorbonne, and CEPR, France;2. Australian National University, CAMA, and EABCN, Australia;3. University .of Washington, CEPR, EABCN, and NBER, United States;1. Division of Monetary Affairs, Federal Reserve Board, Washington, DC 20551, USA;2. 4987 Preakness Place, Bethlehem, PA 18020, USA;1. Sao Paulo School of Economics-FGV, Brazil;2. Michigan State University, United States;1. New York University, 40 Washington Square South, New York, NY 10012, United States;2. Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue N.W., Washington, D.C. 20551, United States;1. London Business School, Regent׳s Park, London NW1 4SA, United Kingdom;2. Department of Economics, University of Leicester, Leicester LE1 7RH, United Kingdom |
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| Abstract: | What are the effects of cyclical fiscal policy on industry growth? We show that industries with a relatively heavier reliance on external finance or lower asset tangibility tend to grow faster (in terms of both value added and of labor productivity growth) in countries that implement fiscal policies that are more countercyclical. We reach this conclusion using Rajan and Zingales׳s (1998) difference-in-difference methodology on a panel data sample of manufacturing industries across 15 OECD countries over the period 1980–2005. |
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| Keywords: | Growth Financial dependence Fiscal policy Countercyclicality |
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