Skip to Main content Skip to Navigation
Journal articles

Governments under influence: Country interactions in discretionary fiscal policy

Abstract : We investigate the interactions between countries, and their effect on the discretionary (i.e. the cyclically-adjusted and interest-adjusted) components of national fiscal policies, observing and investigating the parts of public spending and tax receipts over which governments retain full discretion. Our sample includes 18 OECD countries for the period 1974-2008. First, we construct a measure of a discretionary fiscal policy from the residual component in a VAR model. We then compute this measure for the full sample. Using these data, we next run estimations of the discretionary fiscal policy interactions among the countries in the sample. Our results show that public decisions are affected by interactions between neighbor countries, neighborhood being defined by economic leadership as well as geography. We found evidence of opportunistic behavior by OECD country governments in relation to discretionary public spending. Finally, our estimation results reveal the crucial leadership role played by the USA in relation to discretionary fiscal policy decisions in Europe.
Document type :
Journal articles
Complete list of metadata
Contributor : Nelly Wirth <>
Submitted on : Thursday, November 15, 2012 - 11:39:59 AM
Last modification on : Monday, November 2, 2020 - 10:32:02 AM


  • HAL Id : halshs-00752257, version 1


Aurélie Cassette, Jérôme Creel, Étienne Farvaque, Sonia Paty. Governments under influence: Country interactions in discretionary fiscal policy. Economic Modelling, Elsevier, 2013, 30, pp. 79-89. ⟨halshs-00752257⟩



Record views