The Displacement Effect on Government Expenditure of Two Oil Crises: Japan, the United Kingdom and the United States

Abstract

The purpose of this paper is to examine the displacement effect on government expenditure for Japan, the United Kingdom, and the United States over the periods of the first and second oil price shocks. Following J. Diamond (1977) and P. A. Watt (1978), the displacement effect can be interpreted as a structural change. The author examines the displacement effect by using the Chow test and the modified Wald test proposed by Y. Honda and K. Ohtani (1986). Copyright 1991 by Blackwell Publishers Ltd and The Victoria University of Manchester