Fiscal policies-growth connection: which role for the budget composition?

ABSTRACT

We assess the growth friendliness, both for the short and long term, of the budget composition over the last 16 years (2001 − 2017) for EU countries based on the OECD taxonomy of budget items – growth connection. Budget composition is still far from its optimum, sizable gaps exist for almost all EU countries.

KEYWORDS:

• Budget composition
• growth-friendliness
• European Union
• quality of public finance

JEL:

• E6
• H3
• O4.

Disclosure Statement

The views expressed in the text are the private views of the authors and may not, under any circumstances, be interpreted as stating an official position of the European Commission.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ For Croatia the starting point is 2002 because of missing data.

² These conditions are inter alia: distortionary taxation system, forward-looking consumers not affected by liquidity-constrained, unexpected fiscal consolidation, monetary easing, exchange rate devaluation, structural reforms, reforms of fiscal institutions and the influence of macroeconomic conditions) (Briotti 2005).

³ Interest expenditure and property income (payable) are the only items out of consideration.

⁴ Table A.3 in the annexe reports the consolidation episodes.