EconPapers    
Economics at your fingertips  
 

When does it pay to tax? Evidence from state-dependent fiscal multipliers in the euro area

George Hondroyiannis () and Dimitrios Papaoikonomou ()

No 187, Working Papers from Bank of Greece

Abstract: The impact of fiscal policy on economic growth is investigated within a panel of euro area member states over the period 2004-2011. We mainly consider fiscal impulses identified by (a) changes in the structural primary balance, complemented by evidence from (b) the IMF narrative shocks developed by Devries et al (2011) and (c) a VAR-based measure of unanticipated policy announcements. Aggregate fiscal multipliers are estimated in the region of 0.5, although we find considerable variation depending on the fiscal mix, the degree of openness and the state of the economy. During episodes of recession, tax hikes become significantly more costly in terms of output than expenditure cuts. This appears to be related to increases in the share of hand-to-mouth consumers, proxied by the unemployment rate. Fiscal effects are generally more muted in open economies and during periods of positive growth. Country-specific features in Greece lead to significantly higher estimates, possibly in excess of unity in 2011, reflecting predominantly sizeable revenue effects.

Keywords: Fiscal multipliers; state-dependence; euro area (search for similar items in EconPapers)
JEL-codes: E62 H22 H50 (search for similar items in EconPapers)
Pages: 27
Date: 2014-10
New Economics Papers: this item is included in nep-eec, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://www.bankofgreece.gr/BogEkdoseis/Paper2014187.pdf Full Text (application/pdf)

Related works:
Journal Article: When does it pay to tax? Evidence from state-dependent fiscal multipliers in the euro area (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:187

Access Statistics for this paper

More papers in Working Papers from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Christina Tsochatzi ().

 
Page updated 2023-01-24
Handle: RePEc:bog:wpaper:187