How Potent is Fiscal Policy in Australia?

File Size Format
74817_1.pdf 89Kb Adobe PDF View
Title How Potent is Fiscal Policy in Australia?
Author Makin, Anthony John; Narayan, Paresh Kumar
Journal Name Economic Papers: a journal of applied economics and policy
Year Published 2011
Place of publication Australia
Publisher Wiley-Blackwell Publishing Asia
Abstract This paper examines the efficacy of fiscal policy in Australia, focusing on the relationship between changes in the economy’s consolidated fiscal imbalance and private sector saving over recent decades. We first examine the macroeconomic significance of the offset co-efficient between public saving and private saving, whose size effectively determines the effectiveness of fiscal activism. The approach innovatively suggests that these estimates simultaneously reflect Ricardian and other non-Keynesian explanations of private consumption, such as the life cycle and permanent income theories. Econometric estimation of the offset coefficient for Australia over the period 1980 to 2008 yields values of between 0.75 to near unity, which imply a small or near-zero fiscal multiplier, and that running budget surpluses to lift national saving is ineffective.
Peer Reviewed Yes
Published Yes
Alternative URI
Copyright Statement Copyright 2011 The Economic Society of Australia. Published by Blackwell Publishing. This is the pre-peer reviewed version of the following article: How Potent is Fiscal Policy in Australia?, Economic Papers, Vol. 30(3), 2011, pp. 377-385, which has been published in final form at
Volume 30
Issue Number 3
Page from 377
Page to 385
ISSN 0812-0439
Date Accessioned 2011-12-21
Language en_US
Faculty Griffith Business School
Subject Macroeconomics (incl Monetary and Fiscal Theory)
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1

Show simple item record

Griffith University copyright notice