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Appraising fiscal reaction functions

Author

Listed:
  • António Afonso

    (ISEG/TULisbon; UECE; European Central Bank)

  • João Jalles

    (University of Aberdeen, Business School; European Central Bank)

Abstract

We estimate fiscal responses for an OECD panel, accounting for cross-country interactions, and also estimate the fiscal responses in a panel VAR. We find that governments have increased primary balances when facing higher government indebtedness, implying a Ricardian fiscal regime, while primary balances have improved to reduce government debt. These results hold for the single regression panel analysis and for the panel VAR.

Suggested Citation

  • António Afonso & João Jalles, 2011. "Appraising fiscal reaction functions," Economics Bulletin, AccessEcon, vol. 31(4), pages 3320-3330.
    • Handle: RePEc:ebl:ecbull:eb-11-00815
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    References listed on IDEAS

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    Cited by:

    1. Taner Turan & Pelin Varol Iyidogan, 2022. "Estimating Fiscal Reaction Functions for Developing and Developed Countries: A Dynamic Panel Threshold Analysis," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 70(5), pages 393-410, May.
    2. Piotr Ciżkowicz & Andrzej Rzońca & Rafał Trzeciakowski, 2015. "Windfall of Low Interest Payments and Fiscal Sustainability in the Euro Area: Analysis through Panel Fiscal Reaction Functions," Kyklos, Wiley Blackwell, vol. 68(4), pages 475-510, November.
    3. Truong Nguyen, 2013. "Estimating India's Fiscal Reaction Function," ASARC Working Papers 2013-05, The Australian National University, Australia South Asia Research Centre.
    4. Aviral K. Tiwari & Suleyman Bolat & Mihai Mutascu, 2016. "The Behaviour of US and UK Public Debt: Further Evidence Based on Time Varying Parameters," Journal Transition Studies Review, Transition Academia Press, vol. 23(1), pages 11-19.
    5. Tashevska, Biljana & Trpkova-Nestorovska, Marija & Trenovski, Borce, 2017. "Estimating a fiscal reaction function for the South East European countries," MPRA Paper 91298, University Library of Munich, Germany, revised 2018.
    6. Checherita-Westphal, Cristina & Žďárek, Václav, 2017. "Fiscal reaction function and fiscal fatigue: evidence for the euro area," Working Paper Series 2036, European Central Bank.
    7. Plödt, Martin & Reicher, Claire A., 2015. "Estimating fiscal policy reaction functions: The role of model specification," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 113-128.
    8. Karlis Vilerts & Olegs Tkacevs, 2016. "The Impact of Sovereign Bond Yields on Fiscal Discipline," Working Papers 2016/05, Latvijas Banka.
    9. Shijaku, Gerti, 2014. "Fiscal policy, output and financial stress in the case of developing and emerging European economies: a threshold VAR approach," MPRA Paper 79139, University Library of Munich, Germany.
    10. Attinasi, Maria Grazia & Palazzo, Alessandra Anna & Pierluigi, Beatrice, 2019. "Fiscal activism in the euro area and in other advanced economies: new evidence," Working Paper Series 2344, European Central Bank.
    11. Afonso, António & Jalles, João Tovar, 2012. "Revisiting fiscal sustainability: panel cointegration and structural breaks in OECD countries," Working Paper Series 1465, European Central Bank.
    12. Christian Daude & Christine de la Maisonneuve, 2016. "Subnational fiscal sustainability, risk sharing and “fiscal fatigue” in Colombia," Hacienda Pública Española / Review of Public Economics, IEF, vol. 219(4), pages 137-160, December.
    13. António Afonso & José Alves & José Carlos Coelho, 2023. "Determinants of the degree of fiscal sustainability," Working Papers REM 2023/0255, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    14. Olumide Olusegun Olaoye & Phillip A. Olomola, 2023. "Sub‐Saharan Africa's rising public debt stock: Is there a cause for concern?," South African Journal of Economics, Economic Society of South Africa, vol. 91(1), pages 85-115, March.
    15. Shijaku, Gerti, 2012. "Sustainability of fiscal policy: the case of Albania," MPRA Paper 79089, University Library of Munich, Germany.

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    More about this item

    Keywords

    fiscal regimes; Panel VAR; cross-sectional dependence;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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