Fiscal expansion, the budget deficit and the economy: Norway 1988-91

From 1989 fiscal policy in Norway has been expansionary. With the aid of the econometric model MODAG we estimate the size of the change in policy from 1988 to 1991, its final effect on the central government budget, and its effect on the economy. We also assess the effects on the budget of cyclical factors and structural change. These appear to be more important for the increase in the deficit than activist policy. The budgetary costs of the extra jobs created by the activist part of the policy seem high