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What Determines Fiscal Policy? Evidence from German States

64 Pages Posted: 25 Jul 2007  

Helge Berger

Free University Berlin - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Anika Holler

Free University of Berlin (FUB) - Division of Economics

Date Written: July 2007

Abstract

This paper explores the factors behind the time path of real spending and revenue in the West German states from 1975 to 2004. The empirical approach stresses robustness and takes into account a large set of economic and political variables. Our results suggest that common economic factors and, to a smaller degree, state-specific economic developments are important determinants of state fiscal performance. In comparison, the influence of political factors is limited both in statistical and quantitative terms. Finally, there is evidence that addressing governance problems and ensuring flexibility in terms of fiscal strategy are important ingredients for any policy aimed at improving fiscal outcomes at the state level.

Keywords: German Länder, fiscal policy, public spending, public debt, extreme bounds analysis, governance

JEL Classification: D72, E62, H62, H63

Suggested Citation

Berger, Helge and Holler, Anika, What Determines Fiscal Policy? Evidence from German States (July 2007). CESifo Working Paper No. 2062. Available at SSRN: https://ssrn.com/abstract=1002873

Helge Berger

Free University Berlin - Department of Economics ( email )

Boltzmannstr. 20
Berlin 14195, 14195
Germany
+49 30 838-54037 (Phone)
+49 30 838-52782 (Fax)

HOME PAGE: http://www.wiwiss.fu-berlin.de/berger/eng_index.htm

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany
+49 89 9224 1266 (Phone)
+49 89 9224 1409 (Fax)

HOME PAGE: http://www.CESifo.de

Anika Holler (Contact Author)

Free University of Berlin (FUB) - Division of Economics ( email )

Department of Economics
Boltzmannstr. 20
Berlin, 14195
Germany

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