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So alike, yet so different: Comparing fiscal multipliers across EU members and candidates

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  • Nicolae-Bogdan Ianc

    (LEO - Laboratoire d'Économie d'Orleans [FRE2014] - UO - Université d'Orléans - UT - Université de Tours - CNRS - Centre National de la Recherche Scientifique)

  • Camelia Turcu

    (LEO - Laboratoire d'Économie d'Orleans [FRE2014] - UO - Université d'Orléans - UT - Université de Tours - CNRS - Centre National de la Recherche Scientifique)

Abstract

We estimate, using a Panel Vector Autoregressive approach and data from 2001Q1 to 2017Q1, the fiscal multipliers of the European Union (EU) members and candidates. These countries are grouped according to their stages of integration: original members, new Eurozone members, and candidates for the Eurozone and the EU itself. For each group, we assess the impact of a positive spending shock (expansionary) or a positive tax shock (contractionary) on GDP. Our findings suggest that: (i) rising government spending increases GDP in both the EU and Eurozone candidates (Keynesian multipliers), but slightly decreases it in the Eurozone members (non-Keynesian multipliers); (ii) higher taxes are associated with mixed results in terms of GDP dynamics - both increases and decreases in terms of GDP are found - in the four country groups (suggesting the presence of Keynesian and non-Keynesian multipliers). Overall, these outcomes indicate that spending multipliers are, compared to tax multipliers, more sensitive to European Union or Eurozone membership.
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Suggested Citation

  • Nicolae-Bogdan Ianc & Camelia Turcu, 2020. "So alike, yet so different: Comparing fiscal multipliers across EU members and candidates," Post-Print hal-03533169, HAL.
  • Handle: RePEc:hal:journl:hal-03533169
    DOI: 10.1016/j.econmod.2020.07.018
    Note: View the original document on HAL open archive server: https://hal-univ-orleans.archives-ouvertes.fr/hal-03533169
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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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