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So alike, yet so different: Comparing fiscal multipliers across EU members and candidates

Nicolae-Bogdan Ianc and Camelia Romocea Turcu ()

Economic Modelling, 2020, vol. 93, issue C, 278-298

Abstract: We estimate, using a Panel Vector Autoregressive approach and data from 2001Q1 to 2017Q1, the fiscal multipliers of the European Union (EU) members and candidates. These countries are grouped according to their stages of integration: original members, new Eurozone members, and candidates for the Eurozone and the EU itself. For each group, we assess the impact of a positive spending shock (expansionary) or a positive tax shock (contractionary) on GDP. Our findings suggest that: (i) rising government spending increases GDP in both the EU and Eurozone candidates (Keynesian multipliers), but slightly decreases it in the Eurozone members (non-Keynesian multipliers); (ii) higher taxes are associated with mixed results in terms of GDP dynamics - both increases and decreases in terms of GDP are found - in the four country groups (suggesting the presence of Keynesian and non-Keynesian multipliers). Overall, these outcomes indicate that spending multipliers are, compared to tax multipliers, more sensitive to European Union or Eurozone membership.

Keywords: European union candidates; Eurozone; Fiscal multipliers; (Interacted) panel VAR (search for similar items in EconPapers)
JEL-codes: E62 F62 O52 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.econmod.2020.07.018

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