Investment effects of departures from governmental present-value budget balance |
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Authors: | Ashok Bardhan Dwight Jaffee |
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Institution: | Haas School of Business, University of California , Berkeley , CA , USA |
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Abstract: | The paper investigates whether departures from government borrowing constraints affect the relationship between fiscal-policy innovations and changes in the investment level. ‘Break points’, or apparent departures from present-value budget balance, are then identified. Next, the investment-deficit relationship is examined prior to and following identified break points in an effort to detect potential changes in behaviour. The investment-deficit relationship is quantified by examining posterior coverage bounds of impulse response functions. Britain appears to undergo such a break around 1973. Data from this country suggest that significantly more crowding out occurred following the identified breaks: in contrast, data from other comparison countries that do not appear to have experienced breaks indicate stable investment-deficit relationships. |
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Keywords: | education university post-secondary labour market |
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