Expansionary Fiscal Consolidations in Europe: New Evidence
Technical University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); European Central Bank (ECB)
ECB Working Paper No. 675
In order to assess the existence of expansionary fiscal consolidations in Europe, panel data models for private consumption are estimated for the EU15 countries, using annual data over the period 1970-2005. Three alternative approaches to determine fiscal episodes are used, and the level of government indebtedness is also taken into account. The results show some evidence in favour of the existence of expansionary fiscal consolidations, for a few budgetary spending items (general government final consumption, social transfers, and taxes), depending on the specification and on the time span used. On the other hand, the possibility of asymmetric effects of fiscal episodes does not seem to be corroborated by the results.
Number of Pages in PDF File: 52
Keywords: fiscal policy, expansionary fiscal consolidations, non-Keynesian effects, panel data models, European Union
JEL Classification: C23, E21, E62working papers series
Date posted: September 12, 2006
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