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António Afonso and João Jalles
''Appraising fiscal reaction functions''
( 2011, Vol. 31 No.4 )
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
JEL: H6 - National Budget, Deficit, and Debt: General
C2 - Single Equation Models; Single Variables: General
Manuscript Received : Nov 10 2011 Manuscript Accepted : Dec 09 2011

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