Year: 2015
Type: preprint
Abstract: This paper investigates the causal relationship between government policy and UK output and productivity growth between 1970 and 2009. In an open economy DSGE model of the UK, productivity growth is determined by the tax and regulatory environment in which firms operate. Identification is assured for the DSGE model; therefore the direction of causality is unambiguously from policy to productivity. The model is estimated and tested using simulation-based econometric methods (indirect inference). The results offer robust empirical evidence that temporary changes in policies underpinning the business environment can have long-lasting effects on economic growth.
Author: Lucy Minford
Institution: Cardiff University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2240226902