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The Economic Effects of the EU Budget: A VAR Analysis

Author

Listed:
  • 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.

Suggested Citation

  • Pierfederico Asdrubali & Soyoung Kim, 2007. "The Economic Effects of the EU Budget: A VAR Analysis," Discussion Paper Series 0722, Institute of Economic Research, Korea University.
    • Handle: RePEc:iek:wpaper:0722
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    References listed on IDEAS

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    10. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
    11. Pereira, Alfredo M, 1997. "Development Policies in the EU: An International Comparison," Review of Development Economics, Wiley Blackwell, vol. 1(2), pages 219-235, June.
    12. Buti, Marco, 2003. "Revisiting the stability and growth pact: grand design or internal adjustment?," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34908, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. 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;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(4), pages 631-656, December.
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    Cited by:

    1. Tsai-Yuan Huang & Po-Chin Wu & Ching-Wen Yan, 2014. "Revisiting the redistribution effects of intergovernmental fiscal transfers: evidence from Taiwan," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(4), pages 341-359, December.
    2. Asdrubali, Pierfederico & Kim, Soyoung & Pericoli, Filippo Maria & Poncela, Pilar, 2023. "Risk sharing channels in OECD countries: A heterogeneous panel VAR approach," Journal of International Money and Finance, Elsevier, vol. 131(C).
    3. 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.
    4. Paolo Pasimeni & Stéphanie Riso, 2019. "Redistribution and stabilisation through the EU budget," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 111-138, April.
    5. Paolo Pasimeni & Stéphanie Riso, 2016. "The redistributive function of the EU budget," IMK Working Paper 174-2016, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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    More about this item

    Keywords

    EU Budget; stabilization; redistribution and allocation;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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