TY  - GEN
AB  - This paper studies heterogeneity in the fiscal reaction function for European Union members by
resorting to the unconditional quantile regression estimation. Based on annual observations
spanning from 2005 to 2018, the results point to significant asymmetries concerning the fiscal
response measured in terms of the cyclically adjusted primary balance to different covariates.
First, the primary deficit has a stronger reaction to debt across the lower quantile, which becomes
weaker as the balance reaches a surplus. This indicates the prevalence of fiscal discipline to ensure
the public finance sustainability. Moreover, the life-expectancy negatively affects the fiscal
position and the response is the highest compared to other covariates, which can diminish the
debt and business stabilizing response. Governments seem to run more pronounced pro-cyclical
fiscal policy when the fiscal position is already deteriorated. These empirical evidences are
questioning current as well as future policy design particularly against the background of the
recent pandemic situation exerting supplementary social and financial burden on the countries.
In addition, the level of economic development matters for the response pattern and the reaction
is stronger and positive when countries face poorer fiscal positions. Also, an increase in the longterm
interest rate amplifies the deterioration of fiscal balance especially when its condition is
already bad. Finally, our estimations show that the fiscal position improves as an effect of
educational attainment and of external position especially when the former reaches surplus.
DA  - 2020
DO  - 10.4119/unibi/2951561
KW  - Fiscal response function
KW  - Heterogeneity
KW  - Fiscal sustainability
KW  - Unconditional quantile regression
LA  - eng
PY  - 2020
SP  - 10-
TI  - Heterogeneity in the Fiscal Reaction Function. An Empirical Analysis for EU Member States
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29515610
Y2  - 2024-11-22T01:09:01
ER  -