Each of my three dissertation chapters uses a different empirical approach despite being related globally. The topic is the effects of government spending on macroeconomic outcomes using time series or panel data. The principal discussion is related to the influence of fiscal policy, monetary policy and international macroeconomic variables. Moreover, two chapters spout government spending repercussions in developing countries. The remaining chapter considers the political business cycle hypothesis in the US states as an instrument for identifying government spending.
There is plenty of evidence on the effects of public spending on GDP growth, but not for developing countries. The top five emerging economies, Brazil, Russia, India, China and South Africa, known as BRICS, that accounts for almost a quarter of world GDP have received little attention. Through an Auto-regressive Panel-Vector (P-VAR) model, using quarterly data from 1997Q1 to 2017Q4, I estimate that the government spending multiplier is 0.145% on impact (t=0), but a not singnificant cumulative multiplier of -0.125% percent in 5 years. Also, I analyze how the results of the baseline model vary according to specification adjustments, different order of the variables, and the use of alternative trend removal mechanisms. The robustness analysis shows that the multiplier is sensitive to these changes, which provides evidence of the possible causes of the varied results.
The political business cycle hypothesis suggests that regional authorities seek to influence their voters through increases in government spending during the election years. Given this, I build an instrument based on term limits and electoral laws established in the Legislatures of the 50 US states and the District of Columbia, to estimate the local fiscal multiplier for the period of 2007-2016. My estimate of the local fiscal multiplier is 1.478. Through a robustness check, my estimator fluctuates between 1.446 and 1.522. My results are consistent with the estimations in the geographic cross-sectional multipliers literature for the United States.
Fiscal Policy implications in Ecuador. [work in progress]
The low participation of Ecuador and Latin America in fiscal policy studies meant that the best alternative was to focus on the differentiated effects between developed and developing countries. Evidence suggests that the effects are smaller when it comes to emerging economies. I propose analyzing the repercussions of fiscal policy, whether shocks in government spending or taxes, on Ecuador's economic growth.