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Spend spend-and and-tax: a panel data investigation for the EU

Author

Listed:
  • António Afonso

    (ISEG/TULisbon; UECE; European Central Bank)

  • Christophe Rault

    (LEO, University of Orléans and Research Fellow, BEM Bordeaux Management School)

Abstract

Using bootstrap panel analysis, allowing for cross cross-country correlation, without the need of pre pre-testing for unit roots, we study the causality between government spending and revenue for the EU in the period 1960 1960-2006. We find spend spend-and and-tax causality for Italy, France, Spain, Greece, and Portugal, while tax tax-and and-spend evidence is present for Germany, Belgium, Austria Finland and the UK, and for several EU New Member States. Moreover, in the run run-up to EMU there was some shifting away from a spend spend-and and-tax strategy, implying adjustments of fiscal behaviour.

Suggested Citation

  • António Afonso & Christophe Rault, 2009. "Spend spend-and and-tax: a panel data investigation for the EU," Economics Bulletin, AccessEcon, vol. 29(4), pages 1-32.
    • Handle: RePEc:ebl:ecbull:eb-09-00640
    as

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    File URL: http://www.accessecon.com/pubs/EB/2009/Volume29/EB-09-V29-I4-A32.pdf
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    Citations

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    Cited by:

    1. Fateh Belaid & Christophe Rault, 2020. "Energy Expenditure in Egypt: Empirical Evidence Based on A Quantile Regression Approach," Working Papers 1446, Economic Research Forum, revised 20 Dec 2020.
    2. Fateh Belaïd & Christophe Rault & Camille Massié, 2022. "A life-cycle theory analysis of French household electricity demand," Journal of Evolutionary Economics, Springer, vol. 32(2), pages 501-530, April.
    3. Najia Maraoui & Thouraya Hadj Amor & Islem Khefacha & Christophe Rault, 2021. "How Economic, Political, and Institutional Factors Influence the Choice of Exchange Rate Regimes? New Evidence from Selected Countries of the MENA Region," Working Papers 1498, Economic Research Forum, revised 20 Oct 2021.
    4. Sabrine Ferjani & Sami Saafi & Ridha Nouira & Christophe Rault, 2022. "The Impacts of the Dollar-Renminbi Exchange Rate Misalignment on the China-United States Commodity Trade: An Asymmetric Analysis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(3), pages 507-554, September.
    5. José Alves, 2018. "A DSGE Model to Evaluate the Macroeconomic Impacts of Taxation," Working Papers REM 2018/62, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    6. Athanasios Athanasenas & Constantinos Katrakilidis & Emmanouil Trachanas, 2014. "Government spending and revenues in the Greek economy: evidence from nonlinear cointegration," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 365-376, May.
    7. Yu‐Fu Chen & Michael Funke, 2010. "Booms, Recessions And Financial Turmoil: A Fresh Look At Investment Decisions Under Cyclical Uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(3), pages 290-317, July.
    8. Fateh Belaïd & Christophe Rault & Camille Massié, 2021. "A Life-Cycle Analysis of French Household Electricity Demand," CESifo Working Paper Series 8814, CESifo.
    9. Manuchehr Irandoust, 2018. "Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(3), pages 543-557, August.
    10. Saunoris, James W. & Payne, James E., 2010. "Tax more or spend less? Asymmetries in the UK revenue-expenditure nexus," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 478-487, July.
    11. Trachanas, Emmanouil & Katrakilidis, Constantinos, 2013. "Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 730-749.
    12. Cagri Esener & Brigitte Granville & Roman Matousek, 2022. "Choosing the Optimal Tool for Fiscal Adjustment or Living under Fiscal Constraints: Panel Evidence from Selected OECD Countries," Economic Research Guardian, Mutascu Publishing, vol. 12(1), pages 2-29, June.
    13. Mihai Mutascu, 2015. "Government revenues and expenditures in the EU ex-communist countries: a bootstrap panel Granger causality approach," Working Papers halshs-01109233, HAL.

    More about this item

    Keywords

    fiscal sustainability; EU; causality tests;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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