The Composition of the Government Budget and the Dynamics of Public Debt
AbstractThis paper investigates compositional effects on public-debt dynamics. Our contribution is twofold. First, we improve the methodology by taking explicit account of public-debt dynamics, eliminating a bias present in previous studies. Second, we estimate the evolution of debt dynamics induced by changes in the primary expenditure and revenue ratios - looking at all fiscal periods - not only consolidations as in the previous literature. Whilst we confirm that expenditure cuts are more important for debt reductions than are revenue increases, our findings contrast with the literature in that we obtain persistent debt-augmenting effects of tax reductions.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 63 (2007)
Issue (Month): 2 (June)
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Web page: http://www.mohr.de/fa
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
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- Stegarescu, Dan, 2013. "Does expenditure composition influence the debt level? Evidence from German federal states," Discussion Papers 52/2013, Deutsche Bundesbank, Research Centre.
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