Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234696 
Year of Publication: 
2020
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-01113
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
This paper provides evidence on the effect of fiscal stimulus on economic activity in countries with different degrees of institutional quality. The identification strategy makes use of data on military expenditure to instrument government consumption using local lineal projections as presented in Jordà (2005 ). Based on a panel of 113 countries during the period 1988-2017 , the analysis finds evidence that an increment of 1 percent in government consumption yields a sizable, persistent, and stable increase in economic activity of 0.9 percent in countries with higher institutional quality. In contrast, for countries with lower institutional quality, the effect is smaller (0.4 percent) and more short-lived
Subjects: 
fiscal policy
economic activity
institutional quality
JEL: 
E02
E32
E62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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