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http://hdl.handle.net/10419/57779
  

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dc.contributor.authorPriesmeier, Christophen_US
dc.contributor.authorKoester, Gerrit B.en_US
dc.date.accessioned2012-05-03en_US
dc.date.accessioned2012-05-09T09:58:33Z-
dc.date.available2012-05-09T09:58:33Z-
dc.date.issued2012en_US
dc.identifier.isbn978-3-86558-805-0en_US
dc.identifier.urihttp://hdl.handle.net/10419/57779-
dc.description.abstractThe empirical and theoretical literature on long-term relationships in public finance is dominated by two approaches: Fiscal sustainability and Wagner's law of an increasing state activity. In this paper, we argue that these two relationships should be analyzed simultaneously and not separately. We show how Wagner's law might influence fiscal sustainability and how the interaction of the two can be modelled using vector error correction models that include public expenditures, revenues and GDP. For Germany, we find strong evidence for Wagner's law throughout the whole period analyzed (1960-2007), while our results indicate sustainability of public finances only until 1973. We show that, for the period after 1973, it is the interaction of permanent expenditure increases and revenue reductions resulting from fiscal policy reactions to the oil crisis and Wagner's law that ruins the sustainability of public finances in Germany. Our findings underline the importance of the German debt brake for re-establishing sustainable public finances even under Wagner's law.en_US
dc.language.isoengen_US
dc.publisherDt. Bundesbank Frankfurt, M.en_US
dc.relation.ispartofseriesDiscussion Paper, Deutsche Bundesbank 08/2012en_US
dc.subject.jelH63en_US
dc.subject.jelH19en_US
dc.subject.jelH50en_US
dc.subject.jelE62en_US
dc.subject.ddc330en_US
dc.subject.keywordFiscal sustainabilityen_US
dc.subject.keywordWagner's lawen_US
dc.subject.keywordStructural breaksen_US
dc.subject.keywordCointegrationen_US
dc.subject.keywordVector error correction modelsen_US
dc.titleDoes Wagner's law ruin the sustainability of German public finances?en_US
dc.typeWorking Paperen_US
dc.identifier.ppn71512143Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
dc.identifier.repecRePEc:zbw:bubdps:082012-
Appears in Collections:Discussion Papers, Deutsche Bundesbank

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