A special issue of the leading UK economics publication, the Economic Journal, has published a set of research papers on the impact of governments' fiscal stimulus packages, in a project initiated by the New Zealand Treasury's chief economist, Norman Gemmell.
The three articles, by Norman Gemmell and a number of economics professors at leading European Universities and the OECD in Paris, have been published in the February 2011 Features issue of the Journal.
Norman Gemmell says that following the global financial crisis, numerous OECD governments initiated major boosts to public spending, and/or cuts in taxes, to minimise the recessionary impact of the financial crisis.
"Economists have, for a long time, sought to measure the impact of governments' fiscal policies on their economy's output, but any results obtained may or may not be reliable as a guide to how OECD countries would respond to the largest shock to their economies since the Great Depression, and unprecedented interventions by governments in terms of their tax/spending responses.
"To help bring together evidence on what we know about the possible impact of governments' fiscal stimulus packages, last year I invited a number of academic experts in this field to summarise key areas of evidence and to contribute new results relevant to the question of what the growth impact of OECD economies' fiscal policy changes might be.
"It is an area of research that is especially relevant in New Zealand, where tax policy has been seen as an important contributor to policy reforms aimed at boosting the economy's growth rate, and where significant fiscal injections occurred during 2008-2010," Norman Gemmell says.
Two points raised in the research are:
- An ill-conceived fiscal stimulus package could mean that any short-run gains in economic growth are achieved at a cost of possibly substantially lower growth over the longer run
- Evidence suggests that what matters most for longer-run growth is not so much the overall level of taxes and spending, but the structure of the tax system, for example, the rates of income tax versus consumption tax
Those interested in accessing the research papers can access them here http://onlinelibrary.wiley.com/doi/10.1111/ecoj.2011.121.issue-550/issuetoc
Read the introduction by Norman Gemmell.
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