Date: 2011
Type: Article
Macro-fiscal volatility and the composition of public spending
Fiscal studies, 2011, Vol. 32, No. 4, pp. 511-538
DE ALMEIDA DUARTE LOPES RISCADO, Sara Maria, STANÍK, Juraj, VÄLILÄ, Timo, Macro-fiscal volatility and the composition of public spending, Fiscal studies, 2011, Vol. 32, No. 4, pp. 511-538
- https://hdl.handle.net/1814/33762
Retrieved from Cadmus, EUI Research Repository
Earlier empirical literature has examined some long- and medium-term aspects of macro-fiscal volatility while leaving its short-term fiscal impact unexplored. To help fill that gap, we examine the impact of macro-fiscal volatility on the composition of public spending. To that end, we analyse a panel of 10 EU countries during 1991-2007. Our results suggest that increases in the volatility of regularly-collected and cyclical revenues such as the VAT and income taxes tend to tilt the expenditure composition in favour of public investment. In contrast, increases in the volatility of ad hoc taxes such as capital taxes tend to favour public consumption spending, albeit only a little. We interpret such volatility innovations as conveying news to the fiscal policymaker about the underlying economic conditions, with especially regularly-collected and cyclical taxes prompting short-term cyclical fine-tuning.
Cadmus permanent link: https://hdl.handle.net/1814/33762
Full-text via DOI: 10.1111/j.1475-5890.2011.00149.x
ISSN: 0143-5671
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