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Fiscal consolidation in Spain: dynamic interdependence of public spending and revenues

Author

Listed:
  • Francisco de Castro

    (Banco de España)

  • José Manuel González-Páramo

    (Universidad Complutense de Madrid)

  • Pablo Hernández de Cos

    (Banco de España)

Abstract

Meeting fiscal targets set out in the Stability and Growth Pact for EMU countries requires the correction of fiscal imbalances. We consider what is the most efficient strategy to achieve permanent reductions in fiscal defficits in Spain. We analyse the possible interdependence between expenditure and revenues by performing standard Granger causality tests. We find that there is a bias towards defficit in public sector size and long-run bidirectional causality between public revenues and expenditure, although the direction of causality seems to hold mainly from public expenditure to revenues. Achieving fiscal consolidation should be based reducing structural public expenditure. (Copyright: Fundación SEPI)

Suggested Citation

  • Francisco de Castro & José Manuel González-Páramo & Pablo Hernández de Cos, 2004. "Fiscal consolidation in Spain: dynamic interdependence of public spending and revenues," Investigaciones Economicas, Fundación SEPI, vol. 28(1), pages 193-207, January.
    • Handle: RePEc:iec:inveco:v:28:y:2004:i:1:p:193-207
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    Cited by:

    1. Francisco de Castro, 2006. "The macroeconomic effects of fiscal policy in Spain," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 913-924.
    2. Francisco de Castro & Pablo Hernández de Cos, 2006. "The economic effects of exogenous fiscal shocks in Spain: a SVAR approach," Working Papers 0604, Banco de España.
    3. Francisco de Castro & Francisco Martí & Antonio Montesinos & Javier J. Pérez & A. Jesús Sánchez-Fuentes, 2014. "Fiscal policies in Spain: Main stylises facts revisited," Working Papers 1408, Banco de España.
    4. Sebastian Hauptmeier & Martin Heipertz & Ludger Schuknecht, 2007. "Expenditure Reform in Industrialised Countries: A Case-Study Approach," Fiscal Studies, Institute for Fiscal Studies, vol. 28(3), pages 293-342, September.
    5. Francisco de Castro, 2003. "Non-Keynesian effects of public expenditure in Spain," Applied Economics Letters, Taylor & Francis Journals, vol. 10(10), pages 651-655.
    6. de Castro, Francisco & Hernández de Cos, Pablo, 2008. "The economic effects of fiscal policy: The case of Spain," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1005-1028, September.
    7. Holger Bonin & Concepció Patxot & Guadalupe Souto, 2014. "Cyclically‐Neutral Generational Accounting," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 117-137, June.
    8. Magazzino, Cosimo, 2010. "Public expenditure and revenue in Italy, 1862-1993," MPRA Paper 27308, University Library of Munich, Germany.
    9. Arcade NDORICIMPA, 2017. "Analysis of Asymmetries in the Tax-Spending Nexus in Burundi," Journal of Economics and Political Economy, KSP Journals, vol. 4(1), pages 53-70, March.

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    More about this item

    Keywords

    Fiscal consolidation; causality; cointegration;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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