The Role of Institutional Quality on the Effects of Fiscal Stimulus

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Apr 2020
This paper provides evidence on the effect of fiscal stimulus on economic activity for countries with different degrees of institutional quality. For a panel of 113 countries during the period 1988-2017, we find evidence that an increment of 1% in government consumption yields a sizable, persistent and stable increase in economic activity of 0.9% in countries with higher institutional quality.