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Assessing Long-Term Fiscal Developments: a New Approach

  • António Afonso
  • Luca Agnello
  • Davide Furceri
  • Ricardo M. Sousa

We use a new approach to assess long-term fiscal developments. By analyzing the timevarying behaviour of the two components of government spending and revenue – responsiveness and persistence – we are able to infer about the sources of fiscal behaviour. Drawing on quarterly data we estimate recursively these components within a system of government revenue and spending equations using a Three-Stage Least Square method. In this way we track fiscal developments, i.e. possible fiscal deteriorations and/or improvements for eight European Union countries plus the US. Results suggest that positions have not significantly changed for Finland, France, Germany, Spain, the United Kingdom and the US, whilst they have improved for Belgium, Italy, and the Netherlands.. KEY Words: Fiscal Deterioration, Fiscal Sustainability

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp192009.pdf
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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2009/19.

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Date of creation: Mar 2009
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Handle: RePEc:ise:isegwp:wp192009
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Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL

Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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