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The Economic Effects of the EU Budget: A VAR Analysis

Author

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  • Pierfederico Asdrubali

    (John Cabot University)

  • Soyoung Kim

    () (Department of Economics, Korea University)

Abstract

This paper analyzes the allocation, redistribution and stabilization role of the EU budget from 1976 to 2001. We use impulse responses from VAR models to infer the dynamic effect of a country's GNP on its disposable income--defined as GNP plus net EU budget transfers--both in the short run (stabilization) and in the long run (redistribution). In addition, we measure the allocation role of net budget transfers through their "dynamic multiplier" effect on a country's GNP, circumventing the difficult task of estimating allocation via costs and benefits of trade flows. By disaggregating our data by subperiod and by budget component, we discover how diverse the above effects can be in different decades and for different budget programs. Finally, our framework allows us to establish some additional stylized facts that help derive relevant economic relations and useful policy conclusions.

Suggested Citation

  • Pierfederico Asdrubali & Soyoung Kim, 2007. "The Economic Effects of the EU Budget: A VAR Analysis," Discussion Paper Series 0722, Institute of Economic Research, Korea University.
  • Handle: RePEc:iek:wpaper:0722
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0722.pdf
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    References listed on IDEAS

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    6. Asdrubali, Pierfederico & Kim, Soyoung, 2004. "Dynamic risksharing in the United States and Europe," Journal of Monetary Economics, Elsevier, vol. 51(4), pages 809-836, May.
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    Cited by:

    1. Gagnon, Marie-Hélène & Gimet, Céline, 2013. "The impacts of standard monetary and budgetary policies on liquidity and financial markets: International evidence from the credit freeze crisis," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4599-4614.
    2. Paolo Pasimeri & Stéphanie Riso, 2016. "The redistributive function of the EU budget," IMK Working Paper 174-2016, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    Keywords

    EU Budget; stabilization; redistribution and allocation;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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