Discretionary Fiscal Policy: Review and Estimates for the EU

Roel Beetsma and Massimo Giuliodori ()

No 2948, CESifo Working Paper Series from CESifo

Abstract: We briefly review the theoretical and empirical consequences of discretionary fiscal policy changes, after which we provide our own estimates for the EU countries. A fiscal expansion raises output and consumption and reduces the trade balance. Moreover, the stimulating effect of higher government purchases is weaker and the trade balance reduction is larger for more open EU economies, consistent with larger leakage effects. Further direct estimates suggest that fiscal expansions in large EU economies have non-negligible consequences for economic activity in the main trading partners. This provides a rationale for the concerted fiscal expansion recently initiated by the European Commission.

JEL-codes: E62 F41 F42 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2948

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