DOI: https://doi.org/10.52903/wp2022298
A FUNCTIONAL CLASSIFICATION ANALYSIS OF GOVERNMENT SPENDING MULTIPLIERS
Panagiotis Th. Konstantinou
Athens University of Economics and Business
Andromachi Partheniou
University of Patras
Athanasios Tagkalakis
University of Patras
Abstract
Using a panel of 33 OECD countries we estimate government spending multipliers for 11 different categories (functions) of spending: General Public Services, Defense, Public Order and Safety, Transport & Communication, Economic Services, Environment Protection, Housing and Community Amenities, Health, Education, Recreation, Culture and Religion, and Social Protection. We also account for variations in the state of the business cycle (recession vs expansion). Our results suggest that Public Services, Defense, Public Order, Transport & Communication, Health, Recreation and Education produce positive and high multipliers, whereas multipliers for Economic Services are negative, and multipliers for Environmental Protection, Housing and Social Protection are insignificant. In addition, multipliers for Public Services, Defense, Public Order, Transport & Communication, Health, Recreation and Education are higher in recession than in expansion.
Keywords: Government Spending Multipliers, Functional Classification, State-Dependent Multipliers, Local Projections, Smooth-Transition Models
JEL-classifications: C33, E32, E62
Acknowledgment: Andromachi Partheniou gratefully acknowledges financial support from the Greek State Scholarships Foundation (IKY), co-financed by Greece and the European Union (European Social Fund-ESF), through the Operational Programme “Human Resources Development, Education and Lifelong Learning”, in the context of the project “Scholarships programme for post-graduate studies - 2nd Study Cycle” (MIS-5003404). This research was conducted while Athanasios Tagkalakis was on temporary leave from the Bank of Greece. We thank Dimitrios Malliaropulos, Hiona Balfoussia and an anonymous reviewer for helpful comments and suggestions. The views expressed in this paper are those of the authors alone and do not necessarily reflect those of the Bank of Greece. All remaining errors are ours
Correspondence
Panagiotis Th. Konstantinou
Athens University of Economics and Business
76 Patission Street
10434 Athens, Greece
Tel.:+30-210-8203197
E-mail: pkonstantinou@aueb.gr