The Cyclical and Long-Term Behavior of Government Expenditures in Developing Countries

By Gabriela Inchauste, Bernardin Akitoby, Benedict J. Clements, Sanjeev Gupta

October 1, 2004

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Gabriela Inchauste, Bernardin Akitoby, Benedict J. Clements, and Sanjeev Gupta. The Cyclical and Long-Term Behavior of Government Expenditures in Developing Countries, (USA: International Monetary Fund, 2004) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We examine the short- and long-term movements of government spending relative to output in 51 countries. We find that in the short term, the main components of government spending increase with output in about half of the sample countries, with some variation across spending categories and countries. Further, we find that there is a long-term relationship between government spending and output (in line with "Wagner's law") for the majority of countries for at least one spending aggregate. In the short term, we find that power dispersion and government size typically dampen the positive response of government spending to output. Output volatility and financial risk, on the other hand, contribute to the procylicality of government spending.

Subject: Capital spending, Current spending, Expenditure, Government consumption, National accounts, Total expenditures

Keywords: Africa, Business cycles, Capital spending, Current spending, Current spending, Elasticity of government spending, Financial risk, Fiscal policy, GDP ratio, Government consumption, Government consumption expenditure, Government spending, Spending category, Total expenditures, Total spending, Wagner’s law, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/202
Stock No:

WPIEA2004202
ISBN:

9781451874433
ISSN:

1018-5941

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