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Non-Keynesian Effects of Fiscal Policy in the EU-15

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  • António Afonso

Abstract

The possibility of the so called "non-Keynesian" was illustrated by several fiscal episodes in Europe during the last two decades, giving rise to a growing body of both theoretical and empirical literature. The purpose of this paper is twofold. First, a simple two period model for private consumption is presented in order to explain the possibility of both Keynesian and non-Keynesian effects of fiscal policy, the main feature being the relation between interest rate and taxes and the existence of rationed consumers. Second, and in order to evaluate the empirical evidence for Europe, panel data models for private consumption are estimated for the EU-15 countries, using annual data over the period 1970 to 1999. The estimation results for the 15 EU countries show some evidence that fiscal policy has the standard Keynesian effects when there are no fiscal adjustments. However, in the presence of fiscal adjustments the traditional Keynesian effects may become non-Keynesian. This reversion occurs basically when the fiscal adjustment is a contractionary one, and is virtually unimportant when the adjustment is a fiscal expansion, revealing therefore some asymmetric consequences of fiscal policy.

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Bibliographic Info

Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2001/07.

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Date of creation: 2001
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Handle: RePEc:ise:isegwp:wp72001

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Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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Keywords: fiscal policy; expansionary fiscal contractions; non-Keynesian effects;

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Citations

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Cited by:
  1. Maria Neicheva, 2006. "Non-Keynesian Effects of Government Expenditure on Output in Bulgaria: An HP Filter Approach," Post-Communist Economies, Taylor & Francis Journals, vol. 18(1), pages 1-12.
  2. Johansson, Martin & Jönsson, Kristian, 2003. "Public debt and the effects of government expenditure on private consumption - A Kalman filter analysis of the Swedish experience 1970-1997," Working Papers 2003:3, Lund University, Department of Economics.
  3. Doris Prammer, 2004. "Expansionary Fiscal Consolidations? An Appraisal of the Literature on Non-Keynesian Effects of Fiscal Policy and a Case Study for Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 34–52.
  4. António Afonso & Christiane Nickel & Philipp Rother, 2005. "Fiscal Consolidations in the Central and Eastern European Countries," Working Papers Department of Economics 2005/03, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  5. Jérôme Creel & Bruno Ducoudre & Catherine Mathieu & Henri Sterdyniak, 2005. "Doit-on oublier la politique budgétaire? Une analyse critique de la nouvelle théorie anti-keynésienne des finances publiques," Sciences Po publications info:hdl:2441/1769, Sciences Po.
  6. Afonso, António, 2006. "Expansionary fiscal consolidations in Europe: new evidence," Working Paper Series 0675, European Central Bank.
  7. Francesco Busato & Bruno Chiarini & Enrico Marchetti, 2005. "Indeterminacy, Underground Activities and Tax Evasion," Working Papers 289, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  8. Jönsson, Kristian, 2004. "Effective Consumption and Non-Keynesian Effects of Fiscal Policy," Working Papers 2004:26, Lund University, Department of Economics.
  9. Sergio Sola, 2013. "Temporary and Persistent Fiscal Policy Shocks," IHEID Working Papers 06-2013, Economics Section, The Graduate Institute of International Studies.
  10. Anton Burger & Martin Zagler, 2007. "Reasons for the U.S. growth period in the nineties: non-keynesian effects, asset wealth and productivity," Department of Economics Working Papers wuwp095, Vienna University of Economics, Department of Economics.
  11. Jönsson, Kristian, 2004. "Fiscal Policy Regimes and Household Consumption," Working Papers 2004:12, Lund University, Department of Economics.
  12. repec:spo:wpecon:info:hdl:2441/1769 is not listed on IDEAS
  13. Francesco Busato & Bruno Chiarini & Guido M. Rey, 2005. "The Macroeconomic Implications of Fiscal Policy with Tax Evasion," Economics Working Papers 2005-04, School of Economics and Management, University of Aarhus.
  14. Neicheva, Maria, 2007. "Non-Keynesian effects of Government Spending: Some implications for the Stability and Growth Pact," MPRA Paper 5277, University Library of Munich, Germany.
  15. António Afonso, 2007. "Expansionary fiscal consolidations in Europe: part of conventional wisdom?," Money Macro and Finance (MMF) Research Group Conference 2006 50, Money Macro and Finance Research Group.

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