Spend-and-tax: A Panel Data Investigation for the EU

Antonio Afonso and Christophe Rault ()

No CESifo Working Paper No. 2705, CESifo Working Paper Series from CESifo Group Munich

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

Keywords: panel causality; fiscal policy; EU (search for similar items in EconPapers)
JEL-codes: C23 E62 H62 (search for similar items in EconPapers)
Date: 2009
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