The Economic Effects of the EU Budget: A VAR Analysis

Pierfederico Asdrubali and Soyoung Kim

No 722, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: This paper analyzes the allocation, redistribution and stabilization role of the EU budget from 1976 to 2001. We use impulse responses from VAR models to infer the dynamic effect of a country's GNP on its disposable income--defined as GNP plus net EU budget transfers--both in the short run (stabilization) and in the long run (redistribution). In addition, we measure the allocation role of net budget transfers through their "dynamic multiplier" effect on a country's GNP, circumventing the difficult task of estimating allocation via costs and benefits of trade flows. By disaggregating our data by subperiod and by budget component, we discover how diverse the above effects can be in different decades and for different budget programs. Finally, our framework allows us to establish some additional stylized facts that help derive relevant economic relations and useful policy conclusions.

Keywords: EU Budget; stabilization; redistribution and allocation (search for similar items in EconPapers)
JEL-codes: F36 H71 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2007
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Journal Article: The Economic Effects of the EU Budget: A VAR Analysis* (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:iek:wpaper:0722

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