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António Afonso and Christophe Rault
''Spend-and-tax: a panel data investigation for the EU''
( 2009, Vol. 29 No.4 )
Using bootstrap panel analysis, allowing for cross-country correlation, without the need of pre-testing for unit roots, we study the causality between government spending and revenue for the EU in the period 1960-2006. We find spend-and-tax causality for Italy, France, Spain, Greece, and Portugal, while tax-and-spend evidence is present for Germany, Belgium, Austria Finland and the UK, and for several EU New Member States. Moreover, in the run-up to EMU there was some shifting away from a spend-and-tax strategy, implying adjustments of fiscal behaviour.
Keywords: panel causality, fiscal policy, EU
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
C3 - Models with Panel Data
Manuscript Received : May 19 2009 Manuscript Accepted : Oct 12 2009

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