Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152680
Authors: 
De Ávila, Diego Romero
Strauch, Rolf
Year of Publication: 
2003
Series/Report no.: 
ECB Working Paper 246
Abstract: 
In Lisbon the European Council proclaimed a European growth strategy. It considers an average economic growth rate of around 3 percent as a realistic prospect for the coming years and assigns public finances an important role in the process of achieving this goal. This paper addresses the question whether we can find empirical evidence for European countries that public finance reform affects trend growth. Focusing on time series patterns, we investigate whether there have been persistent shifts or trends in economic growth and fiscal variables over the last 40 years. In addition, we estimate a distributed lag model, which 1) indicates that government consumption and transfers negatively affect growth rates of GDP per capita over the business cycle, while public investment has a positive impact, and 2) provides robust evidence that distortionary taxation affects growth in the medium-term through its impact on the accumulation of private physical capital.
Subjects: 
Europe
long-term growth
public finance
JEL: 
C22
C23
H11
O11
Document Type: 
Working Paper

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