Appraising fiscal reaction functions

Antonio Afonso and João Tovar-Valles

No 2011/23, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: We estimate fiscal responses for an OECD panel, accounting for cross-country interactions, and also estimate the fiscal responses in a panel VAR. We find that governments have increased primary balances when facing higher government indebtedness, implying a Ricardian fiscal regime, while primary balances have improved to reduce government debt. These results hold for the single regression panel analysis and for the panel VAR.

Keywords: fiscal regimes; Panel VAR; cross-sectional dependence Classification-C23; E62; H62 (search for similar items in EconPapers)
Date: 2011-10
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Citations: View citations in EconPapers (15)

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