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Spend-and-tax: A Panel Data Investigation for the EU

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Author Info
António Afonso ()
Christophe Rault ()

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Abstract

Using bootstrap panel analysis, allowing for cross-country correlation, without the need of pre-testing for unit roots, we study the causality between government spending and revenue for the EU in the period 1960-2006. We find spend-and-tax causality for Italy, France, Spain, Greece, and Portugal, while tax-and-spend evidence is present for Germany, Belgium, Austria Finland and the UK, and for several EU New Member States. Moreover, in the run-up to EMU there was some shifting away from a spend-and-tax strategy, implying adjustments of fiscal behaviour.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2705.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2705

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Related research
Keywords: panel causality; fiscal policy; EU;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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  1. Christophe Rault & Antonio Alfonso, 2007. "What do we really know about fiscal sustainability in the EU? A panel data diagnostic," William Davidson Institute Working Papers Series wp893, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  2. Konya, Laszlo, 2006. "Exports and growth: Granger causality analysis on OECD countries with a panel data approach," Economic Modelling, Elsevier, vol. 23(6), pages 978-992, December. [Downloadable!] (restricted)
  3. António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 19-, March.
    Other versions:
  4. Chang, Tsangyao & Liu, Wen Rong & Caudill, Steven B, 2002. "Tax-and-Spend, Spend-and-Tax, or Fiscal Synchronization: New Evidence for Ten Countries," Applied Economics, Taylor and Francis Journals, vol. 34(12), pages 1553-61, August. [Downloadable!] (restricted)
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This page was last updated on 2009-11-3.

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