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The Economic Effects of the EU Budget: A VAR Analysis

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  • Pierfederico Asdrubali

    (John Cabot University)

  • Soyoung Kim

    ()
    (Department of Economics, Korea University)

Abstract

This paper analyzes the allocation, redistribution and stabilization role of the EU budget from 1976 to 2001. We use impulse responses from VAR models to infer the dynamic effect of a country's GNP on its disposable income--defined as GNP plus net EU budget transfers--both in the short run (stabilization) and in the long run (redistribution). In addition, we measure the allocation role of net budget transfers through their "dynamic multiplier" effect on a country's GNP, circumventing the difficult task of estimating allocation via costs and benefits of trade flows. By disaggregating our data by subperiod and by budget component, we discover how diverse the above effects can be in different decades and for different budget programs. Finally, our framework allows us to establish some additional stylized facts that help derive relevant economic relations and useful policy conclusions.

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File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/W0722.pdf
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Bibliographic Info

Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 0722.

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Length: 33 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:iek:wpaper:0722

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Keywords: EU Budget; stabilization; redistribution and allocation;

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References

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  1. Wolfgang Wessels, 1997. "An Ever Closer Fusion? A Dynamic Macropolitical View on Integration Processes," Journal of Common Market Studies, Wiley Blackwell, vol. 35(2), pages 267-299, 06.
  2. Frank Barry & John Bradley & Aoife Hannan, 2001. "The Single Market, the Structural Funds and Ireland's Recent Economic Growth," Journal of Common Market Studies, Wiley Blackwell, vol. 39(3), pages 537-552, 09.
  3. Bayoumi, Tamim & Masson, Paul R., 1995. "Fiscal flows in the United States and Canada: Lessons for monetary union in Europe," European Economic Review, Elsevier, vol. 39(2), pages 253-274, February.
  4. Brian Ardy, 1988. "The National Incidence of the European Community Budget," Journal of Common Market Studies, Wiley Blackwell, vol. 26(4), pages 401-429, 06.
  5. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2003. "Revisiting the stability and growth pact: Grand design or internal adjustment?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152958, Tilburg University.
  6. Asdrubali, Pierfederico & Sorensen, Bent E & Yosha, Oved, 1996. "Channels of Interstate Risk Sharing: United States 1963-1990," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1081-1110, November.
  7. Pereira, Alfredo M, 1997. "Development Policies in the EU: An International Comparison," Review of Development Economics, Wiley Blackwell, vol. 1(2), pages 219-35, June.
  8. Rafael Doménech & Antonio Maudes & Juan Varela, 2000. "Fiscal flows in Europe: The redistributive effects of the EU budget," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(4), pages 631-656, December.
  9. Paul R. Masson & Tamim Bayoumi, 1998. "Liability-Creating Versus Non-Liability-Creating Fiscal Stabilization Policies," IMF Working Papers 98/112, International Monetary Fund.
  10. Bayoumi, Tamim & Masson, Paul R, 1998. "Liability-Creating versus Non-liability-Creating Fiscal Stabilisation Policies: Ricardian Equivalence, Fiscal Stabilisation, and EMU," Economic Journal, Royal Economic Society, vol. 108(449), pages 1026-45, July.
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Cited by:
  1. Gagnon, Marie-Hélène & Gimet, Céline, 2013. "The impacts of standard monetary and budgetary policies on liquidity and financial markets: International evidence from the credit freeze crisis," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4599-4614.

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