The empirical effects of government spending

This PhD thesis investigates the role of government spending in the macro-economy. A central problem is that government spending and other macroeconomic variables are simultaneously affected by the same external factors. Moreover, policymakers often react directly to downturns in the economy by increasing spending, creating two-way causality. It is therefore difficult to estimate causal effects of changes in government spending. As a solution, each chapter in this PhD thesis uses econometric techniques to identify the part of government spending that does not react to movements of the economy. The aim is to understand which underlying factors play a role in the way government spending affects the economy. Three factors are analyzed: the length of the anticipation horizon, different categories of spending and sectoral and regional spillover effects.