Statistical analysis concludes fiscal policies have an insignificant impact on business confidence.
Konstantinous & Tagkalakis ’11 [Panagiotis; Athanasios; 02-10-2011; “Boosting confidence: Is there a role for fiscal policy”; Panagiotis is a Lecturer at the University of Macedonia with a PhD from Department of Economics at the European University Institute; Athanasios has a PhD in Economics from the European University Institute; Economic Modeling 28 \\pairie]
In Table 2, we report our results regarding the effects of key fiscal variables on business confidence.11 To start with, we note that an increase in government consumption has no significant effect on business confidence. Similar to our findings regarding consumer confidence, we find the effect of non-wage government consumption positive while that of the government wage bill negative. However, with one exception (column 8), the estimated coefficients for both wage and non-wage government consumption are insignificant. In addition, we find that government investment exerts a negative but insignificant effect on business confidence. Note here that one could have expected that the initiation of public investment projects, involving the private sector, would have a positive effect on business confidence to the extent that these public investment projects improve prospects of economic growth. Nevertheless, a contrarian view is that public investment projects do not have a direct effect on manufacturing (hence on business confidence), since they either do not involve specific products in the manufacturing sector or the “receipt of payments” might be delayed. Alternatively, according to the standard Keynesian view, an increase in government investment crowds out private investment, which will be reflected in lower business confidence. In line with the Keynesian argument we do find a negative effect, but the coefficient estimate of government investment is not significant