Abstract

CHAMORRO NARVAEZ, Raúl. Economic Growth and Fiscal Policy: A Critical Review of the Literature. Ens. Econ. [online]. 2017, vol.27, n.51, pp.79-107. ISSN 0121-117X.  https://doi.org/10.15446/ede.v27n51.69104.

This study discusses different issues about the relationship between economic growth and fiscal policy. From a theoretical point of view, we start with the model developed by Barro (1990). Then, some later models are introduced, which are in line with the main results in Barro. On the other hand, several empirical studies support the endogenous growth models framework, since government spending has been found to affect long-run economic growth rates. A number of studies on this issue stress that empirical work needs to disaggregate public expenditure. It is also important to include explicitly the government budget constraint given that government decisions on spending and revenues are not independent of each other. Finally, whenever several countries are considered, panel data technique seems to be better than others in order to evaluate the effects of fiscal policy on growth.

JEL: O38, O47, O49, H50, E62.

Keywords : economic growth; fiscal policy; public expenditure; endogenous growth; government budget constraint.

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