Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259863 
Year of Publication: 
2002
Series/Report no.: 
Working Paper No. 2002:11
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
Instead of relying on descriptive statistics to evaluate the permanence of a fiscal contraction, this paper suggests that this issue should be studied using tests for structural breaks in cointegrating relationships between taxes and spending. We label a fiscal contraction as 'permanent' if a structural break is detected during the contraction period. Applying Gregory and Hansen's (1996) test on Danish and Irish data and find that the fiscal contraction in Ireland (1987-1989) induced a structural change in fiscal policy while the results from the Danish data do not imply such a regime shift. We discuss possible explanations for this finding
Subjects: 
Fiscal Policy
Fiscal contraction
Cointegration
Structural breaks
JEL: 
C22
E62
H30
Document Type: 
Working Paper

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