Government size and output volatility : is there a relationship?

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Title: Government size and output volatility : is there a relationship?
ISBN: 952-462-205-X
Author: Virén, Matti
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2005
Series number: 8/2005
Year of publication: 2005
Publication date: 5.3.2005
Published in: Published in International economics, 57 ; 3 ; 2004.
Pages: 28
Keywords: finanssipolitiikka; tehokkuus; julkinen hallinto; koko; vaikutukset; tuotanto; kansainvälinen; volatiliteetti; julkinen sektori; automaattiset vakauttajat
Abstract: This paper provides some further tests for the proposition that a larger public sector leads to smaller output volatility. Both Gali and Fatas & Mihov have provided some evidence which appears to support this proposition. Their evidence is, however, based on a relatively small sample of countries. In this study, we go beyond the OECD sample and focus on a much larger World Bank data set covering up to 208 countries for the period 1960-2002.We also seek to utilise some time series aspects of the material by using pooled cross-section time series data. Tests with different models and measures clearly indicate that the original results are not very robust and the relationship between government size and output volatility is either nonexistent or very weak at best. Key words: government, fiscal policy, automatic stabilisers JEL classification numbers: E62, H30, E32

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