IDEAS home Printed from https://ideas.repec.org/p/hal/spmain/halshs-00752257.html

Governments under influence: Country interactions in discretionary fiscal policy

Author

Listed:
  • Aurélie Cassette

    (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

  • Jérôme Creel

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po, ESCP-EAP - ESCP-EAP - Ecole Supérieure de Commerce de Paris)

  • Étienne Farvaque

    (EDEHN - Equipe d'Economie Le Havre Normandie - ULH - Université Le Havre Normandie - NU - Normandie Université, SKEMA Business School)

  • Sonia Paty

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We investigate the interactions between countries, and their effect on the discretionary (i.e. the cyclically-adjusted and interest-adjusted) components of national fiscal policies, observing and investigating the parts of public spending and tax receipts over which governments retain full discretion. Our sample includes 18 OECD countries for the period 1974-2008. First, we construct a measure of a discretionary fiscal policy from the residual component in a VAR model. We then compute this measure for the full sample. Using these data, we next run estimations of the discretionary fiscal policy interactions among the countries in the sample. Our results show that public decisions are affected by interactions between neighbor countries, neighborhood being defined by economic leadership as well as geography. We found evidence of opportunistic behavior by OECD country governments in relation to discretionary public spending. Finally, our estimation results reveal the crucial leadership role played by the USA in relation to discretionary fiscal policy decisions in Europe.

Suggested Citation

  • Aurélie Cassette & Jérôme Creel & Étienne Farvaque & Sonia Paty, 2013. "Governments under influence: Country interactions in discretionary fiscal policy," Sciences Po Economics Publications (main) halshs-00752257, HAL.
    • Handle: RePEc:hal:spmain:halshs-00752257
    DOI: 10.1016/j.econmod.2012.08.032
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Sanz-Córdoba, Patricia, 2020. "The role of infrastructure investment and factor productivity in international tax competition," Economic Modelling, Elsevier, vol. 85(C), pages 30-38.
    3. Mustafa Koroglu & Yiguo Sun, 2016. "Functional-Coefficient Spatial Durbin Models with Nonparametric Spatial Weights: An Application to Economic Growth," Econometrics, MDPI, vol. 4(1), pages 1-16, February.
    4. Chortareas, Georgios & Mavrodimitrakis, Christos, 2016. "Can monetary policy fully stabilize pure demand shocks in a monetary union with a fiscal leader?," Economic Modelling, Elsevier, vol. 54(C), pages 463-468.
    5. Hory, Marie-Pierre, 2018. "Delayed mimicking: the timing of fiscal interactions in Europe," European Journal of Political Economy, Elsevier, vol. 55(C), pages 97-118.
    6. Degiannakis, Stavros & Duffy, David & Filis, George & Livada, Alexandra, 2016. "Business cycle synchronisation in EMU: Can fiscal policy bring member-countries closer?," Economic Modelling, Elsevier, vol. 52(PB), pages 551-563.
    7. Marta Lukáčová & Jaroslav Korečko & Sylvia Jenčová & Mária Jusková, 2020. "Analysis of selected indicators of tax competition and tax harmonization in the EU," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(1), pages 123-137, September.
    8. Philipp Mohl & Gilles Mourre & Sven Langedijk & Martijn Hoogeland, 2021. "Does Media Visibility Make EU Fiscal Rules More Effective?," European Economy - Discussion Papers 155, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:spmain:halshs-00752257. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Contact - Sciences Po Department of Economics (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.