Examining the Role of Budget Deficit Policies in Economic Growth from A Keynesian Perspective


  •  Mehmet Cinar    
  •  Ilhan Eroglu    
  •  Baki Demirel    

Abstract

Functional fiscal policy implementation has always been a matter of debate particularly in recessed economies. This study aims to analyze the European Debt Crisis stemming from the 2008 Global Crisis within Keynesian budget deficit policies. We examined the best 5 and worst 5 countries in the Eurozone according to their debt ratios and discussed the growth rates, debt ratios and budget deficit variables of these countries. Panel ARDL model was used for the 2000Q1–2011Q4 period. The analysis results showed that conjunctural deficit policy (functional fiscal policy) had positive effect on economic growth in the short run.



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