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Expansionary fiscal consolidations in Europe: part of conventional wisdom?

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Author Info
António Afonso (ECB and ISEG/UTL-Technical University of Lisbon)

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Abstract

In order to assess whether expansionary fiscal consolidations can be part of conventional wisdom, panel data models for private consumption are estimated for the EU15 countries, using annual data over the period 1970–2005. Three alternative approaches to determine fiscal episodes are used, and the level of government indebtedness is also taken into account. The results show some evidence in favour of the existence of expansionary fiscal consolidations, for a few budgetary spending items (general government final consumption, social transfers, and taxes), depending on the specification and on the time span used. On the other hand, the possibility of asymmetric effects of fiscal episodes does not seem to be corroborated by the results

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Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 50.

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Date of creation: 02 Feb 2007
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Handle: RePEc:mmf:mmfc06:50

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Related research
Keywords: fiscal policy; expansionary fiscal consolidations; non-Keynesian effects; panel data models; European Union;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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