he effes of inome isibuion an fisal poliy on oh invesmen an bue balane: he ase of Euope homas Obs, Özlem Onaan, Maia Nikolaii Absa his pape evelops a muli-ouny pos-kalekian eman-le oh moel ha inopoaes he ole of he ovenmen One novely of his pape is o ineae ossouny effes of boh hanes in inome isibuion an fisal poliy he moel is use o esimae eonomeially he effes of inome isibuion an fisal poliy on he omponens of aeae eman in EU5 ounies he esuls sho ha a poliy mix ha ombines he simulaneous implemenaion of a po-labou ae poliy, an expansionay fisal poliy an a poessive ax poliy in all EU ounies leas o a sinifian ise in he EU5 DP he impa of ae poliies is posiive bu small; he oveall simulus beomes muh sone ih fisal expansion his poliy mix leas o an impovemen in he bue balane in all he EU5 ounies, suesin ha expansionay fisal poliy is susainable hen i is ombine ih ae an poessive ax poliy ea: 207 No: PER 43 REENWH POLAL EONOM RESEARH ENRE (PER)
Keyos: Wae Shae oh Euopean Muliplie Deman Reime Fisal Poliy Aknolemens: his pape is pa of he poje ile An nvesmen an Equaliy-Le Susainable oh Moel fo Euope hih is aie ou joinly by he eenih Poliial Eonomy Reseah ene (PER), he Founaion fo Euopean Poessive Suies (FEPS), hink-ank fo Aion on Soial hane (AS) an Eonomi ounil of he Labou Movemen (ELM) We oul like o hank Enelbe Sokhamme, Mehme Uu, an ay Dymski fo helpful ommens he usual islaimes apply JEL oes: E2 E25 E62 oesponin auhos: homas Obs: Reseah fello, Euopean Univesiy Fankfu (Oe) Email: obs@euopaunie Ṏzlem Onaan: Pofesso of Eonomis, eenih Poliial Eonomy Reseah ene, Univesiy of eenih Maia Nikolaii: Leue in Eonomis, eenih Poliial Eonomy Reseah ene, Univesiy of eenih 2
nouion he oubeak of he ea Reession an he sluish oh in he afemah in mos Euopean ounies has ekinle inees in he effe of fisal poliy on oh, as eviene in he vas lieaue on fisal muliplie effes (Blanha an Leih, 203; ehe, 205) Alhouh i has been shon ha auseiy poliies have neaive effes on oh an pivae invesmen, onibuin o he polone sanaion in Euope, fisal onaion oninues o be he ominan Euopean saey in he pos-isis ea A he same ime, inequaliy has inease sinifianly sine he 980s in all he majo evelope an evelopin ounies ih a simulaneous fall in he shae of labou inome in naional inome an a ise in op inome shaes (Sokhamme 207) he neaive impa of inequaliy on oh has been ell eviene in empiial eseah base on boh supply-sie oh moels (Bao, 2000; Dauey an aia-penalosa, 2007; Be e al, 202) an pos- Keynesian eman-le oh moels (Naasepa an Som, 2006; Hein an Voel, 2008; Sokhamme e al, 2009; Onaan an alanis, 204; Onaan an Obs, 206) Hoeve, he ombine effes of fisal poliy an inome isibuion on oh an fisal pefomane have no ye been empiially invesiae in he onex of eman-le oh moels heoeially, his issue has been exploe in vaious Kalekian moels Bleke (2002) an Palley (204) have analyse ho iffeen ax aes on labou an apial inome affe hehe he oh eime of an eonomy is ae-le o pofi-le Mo an Slaey (994), ommenaoe e al (20), Seuino (202), Du (203), Palley (203), an Hein (206), amons ohes, have suie he effes of inome isibuion an ovenmen expeniue on vaious maoeonomi vaiables, suh as apial aumulaion, labou pouiviy, inflaion an publi eb Bleke (999) has examine open eonomy issues ihin a Kalekian moel ih ovenmen expeniue an axes Hoeve, in he Kalekian lieaue hee is sill a lak of heoeial moels ih oss-ouny spill ove effes of he join effes of inome isibuion an fisal poliy as ell as a eaile empiial analysis he novely of his pape is ofol Fis, e evelop a pos-kalekian heoeial moel ha inopoaes he ole of he ovenmen ihin an open eonomy onex he moel moves beyon he above-menione Kalekian moels beause (i) i is a muli-ouny moel ha allos he analysis of he ineaions beeen ounies an (ii) inopoaes an explii isinion beeen iffeen ypes of ovenmen expeniue Seon, e use his moel in oe o esimae eonomeially he effes of inome isibuion an fisal poliy on he
omponens of aeae eman (AD) fo eah of he EU5 ounies We alulae a Euope-ie muliplie base on he esponses of eah ouny o hanes in no only omesi bu also ohe Euopean ounies inome isibuion, axaion an ovenmen spenin Hene, e move beyon Onaan an alanis (204) an Onaan an Obs (206) ho pesene he impa of simulaneous hanes in inome isibuion in he 20 an he EU5 bu i no inopoae he impa of publi spenin an axes Fom a poliy pespeive, he analysis of he pape an uie he evelopmen of a fisal an ae poliy mix onuive o equiable evelopmen he es of he pape is oanise as follos Seion 2 oulines he heoeial moel Seion 3 pesens he aa an esibes he esimaion mehooloy Seion 4 pesens he esimaion esuls Seion 5 examines he effes of ae an fisal poliies on oh, pivae invesmen an he pimay bue balane, an ompaes he effes hen poliies ae implemene in one ouny in isolaion vesus simulaneously in all ounies Seion 6 isusses ae an fisal poliy mixes an hei impliaions fo oupu, pivae invesmen, an pimay bue balane Finally, seion 7 summaises an onlues 2 A pos-keynesian/pos-kalekian mao moel ih ovenmen 2 Suue of he moel Ou muli-ouny eman-le oh moel fo he EU5 ounies is base on he pos- Kalekian fameok (see Bhaui an Malin, 990); hoeve, he behavioual funions also enompass sana Keynesian moels (e Blanha, 2006) We ineae fisal poliy (ax aes, ovenmen expeniue, publi eb) ino he pivae seo open eonomy moel pesene in Onaan an alanis (204) an Onaan an Obs (206) an moel he effes of a hane in he pofi shae an fisal poliy by means of analysin he ouny level effes on pivae aeae eman: onsumpion, invesmen, expos an impos We hen simulae Euopean ineaions houh ineain he effes of a hane in inome isibuion as ell as fisal poliy of ohe EU5 ounies onsumpion ( ) is iven by: () hee R enoes ajuse pofis W sans fo ajuse aes, enoes implii ax ae (R) on apial inome, sans fo R on labou inome, enoes soial benefis in EU5 efes o he 5 Wes Euopean ol membe saes of he EU hih inlues he UK espie he Bexi eision We keep he UK as pa of ou analysis fo Euope as poliy ooinaion issues isusse in he pape an be implemene even hen ounies ae no pa of a poliial union alhouh e eonise he impoane of a poliial union o failiae suh poliy ooinaion 2
ash an sans fo ohe uen ansfes Noe ha afe-ax ajuse pofis ae equal o an afe-ax ajuse aes ae iven by ompae o Onaan an Obs (206) onsumpion funion () has o ne feaues: fis, i inlues R on apial inome an R on labou inome; seon, i inopoaes soial benefis in ash an ohe uen ansfes hih aumen he isposable inome of househols We hypohesise ha a moe poessive ax sysem (hih in his pape is apue by an inease in axes on apial an a eease in axes on labou) suppos a ae-le eonomi eime, heeas a moe eessive ax sysem oul help oh in a pofi-le eime Pivae invesmen is moelle base on o alenaive speifiaions Ou fis speifiaion is: (2) hee i a is auonomous invesmen, enoes pivae eman, efine as DP ( ) minus he ovenmen expeniue ha is pa of DP (, enoes he ajuse pofi shae an is he ovenmen eb Noe ha he afe-ax ajuse pofi shae is equal o ompae o Onaan an Obs (206), e make hee exensions: fis, e assume ha fims onsie afe-ax pofis in makin invesmen eisions as iely assume in he lieaue (Rohon, 98; Bleke, 2002; Seuino, 202); seon, e inlue publi eb as a aio o DP, hih allos us o ake ino aoun possible finanial oin ou effes (Du, 203); hi, e inoue oal ovenmen expeniue in oe o examine poenial oin-in effes ha mih sem fom he fa ha ovenmen expeniue an impove business envionmen an inease fuue oupu Ou seon alenaive speifiaion fo invesmen is he folloin: (2 ) hee epesens he oss apial fomaion of he ovenmen enoes he ovenmen olleive onsumpion an is he ovenmen iniviual onsumpion ( ) he iffeene beeen equaion (2) an equaion (2 ) is ha he lae inlues a isaeaion of ovenmen expeniue ino iffeen aeoies ain boaly on Seuino (202) ho luses ovenmen expeniue ino invesmen in physial an soial infasuue in oe o apue hei iffeen oin-in effes n equaion (2 ) iniviual onsumpion ompises soial ansfes in kin povie o iniviual househols olleive onsumpion efes o olleive oos an sevies ha ae povie by he ovenmen o all membes of he soiey Boh olleive an iniviual onsumpion 3
inlue expeniues elae o healh, euaion an ulue Publi invesmen inlues, amons ohes, invesmen in anspoaion, onsuion an ohe physial apial We expe ha eah of hese ypes of expeniues have a iffeen impa on pivae invesmen Hoeve, ue o sevee aa limiaions ih ahe sho ime seies an muliollineaiy issues, his eaile speifiaion is unlikely o apue poenially sinifian effes of iffeen ypes of publi spenin; heefoe, e pesen he empiial esuls of his speifiaion only as a obusness hek an inepe hem as iniaive esuls n oe o ineae he effes of expansionay fisal poliy on oh in EU5 e efine ovenmen expeniue as a faion of DP: 2 (3) Likeise, fo he omponens of ovenmen expeniue e have: (3 ) (3 ) (3 ) he oal pimay ovenmen expeniue ( is equal o: (4) axes ( ) ae iven by: (5) hee is R on onsumpion he eb of he ovenmen seo is: (6) hee enoes he lae sok of ovenmen eb, is he pimay bue balane equal o axes minus oal pimay ovenmen expeniue Fo simpliiy, e assume aay he asse sie of he ovenmen balane shee he inees ae on ovenmen eb ( ) is assume o inease as he ovenmen eb-o- DP aio ineases: (7) DP is iven by: (8) hee ne expos (NX) is equal o expos (X) minus impos (M) We moel he effes of isibuion on ne expos usin a sepise appoah ha follos Sokhamme e al (2009), Onaan e al (20), an Onaan an alanis (204) We exen 2 We assume ha he ovenmen eies on expansionay fisal poliy aes akin ino aoun he shae of ovenmen expeniue in naional inome ahe han he absolue value 4
he speifiaion of omesi an expo pies by inluin R on onsumpion a home an aboa Domesi pies an expo pies ( ae eemine as follos: (9) (0) hee enoes nominal uni labou oss sans fo impo pies an enoes R on onsumpion aboa Expos ae iven by: () hee is he DP of he es of he ol an is he exhane ae Expos ae a funion of elaive pies of expos o impos, he DP of he es of he ol an exhane ae mpos ae equal o: (2) mpos epen on omesi pies elaive o impo pies, he exhane ae an aeae eman in hih e inlue sepaaely an (see also Palley, 2009) n paallel o he alenaive invesmen speifiaion, e also esimae an alenaive speifiaion fo impos hee e isaeae ovenmen expeniue ino he hee iffeen ypes as esibe above: (2 ) 22 Effes of a hane in he pofi shae an fisal poliy on aeae eman pivae invesmen an pimay bue balane he moel pesene above an be eploye o suy he sho-un effes of a hane in pofi shae ( ) an fisal poliy on aeae eman, pivae invesmen an pimay bue balane (he alebai eails ae epoe in Appenix A) An inease in has boh fisoun an seon-oun effes on AD (see Appenix A) An inease in ens o eue onsumpion (sine he popensiy o onsume ou of aes is expee o be hihe han he popensiy o onsume ou of pofis) inease invesmen (sine i aises expee pofiabiliy as ell as he availabiliy of inenal finane) an inease ne expos (sine he uni labou os oes on) hese ae he fis-oun effes A a seon sae, he hane in oupu ha has been ause by a ise in has muliplie effes on AD Noe ha any hane in oupu affes pivae invesmen no only via is impa on he sales of fims bu also houh is effe on he ovenmen eb-o-dp aio 5
ha affes he os of booin Reain he effes of on he pimay bue balane axes on pofis en o inease axes on labou en o eline an sine onsumpion elines an axes on onsumpion en o eease he ovenmen expeniue as a aio o DP oes no hane in esponse o he hanes in oupu (sine he ovenmen-o-dp aio is fixe as a poliy eision) Fuhemoe e fous on hee hanes in fisal poliy (i) an inease in ovenmen expeniue-o-dp aio ( ) (ii) an inease in he R on apial inome ( ) an (iii) a eease in R on labou inome ( ) When ineases ne expos ae neaively affee sine he ovenmen may buy oos an sevies fom aboa 3 he impa on invesmen is ambiuous sine hee ae boh oin-in effes (a ise in ovenmen expeniue ineases he sales of fims an impoves business envionmen) an oinou effes (iven ha ovenmen inebeness ineases) Hoeve sine he ise in simulaes oupu e also have some seon-oun effes hese seon-oun effes en o eue he ovenmen eb-o-dp aio aenuain he oin-ou impa on invesmen he pimay bue balane ens o eease beause of hihe spenin Hoeve i an also inease: if oupu ineases ax evenues ill also inease he eails ae epoe in Appenix A2 An inease in affes onsumpion an invesmen iely onsumpion eeases sine afe-ax pofis eline nvesmen is avesely affee by loe afe-ax pofis Hoeve he oveall effe on invesmen is ambiuous beause a ise in an eihe inease o eease he eb-o-dp aio he effe on pimay bue balane is ambiuous as ell: ie axes inease bu he axes on onsumpion eline (see Appenix A3) Simila hannels apply hen eeases (see Appenix A4) All he effes menione above efe only o hanes ha ae implemene in ounies iniviually Hoeve ain on Onaan an Obs (206) ou moel an be applie o analyse he effes assoiae ih hanes ha ake plae simulaneously in he EU ounies his is paiulaly impoan beause of he hih ineaion of he Euopean eonomies he elae alulaions ae epoe in Appenix B Fuhemoe e analyse he effes of a poliy mix ha ombines ae an fisal poliies (see Appenix ) We onsie hee poliy mixes: (a) A po-labou ae poliy ombine 3 An inease in publi spenin poues an inease in he aes of he publi seo employees affein he ae shae Fo simpliiy e assume aay his effe f his effe as aken ino aoun an inease in publi spenin oul povie a fuhe boos o eonomi aiviy via onsumpion 6
ih an inease in ovenmen spenin; (b) an inease in () a poliy mix ha ombines (a) an (b) ombine ih a eease in 3 Daa an esimaion mehooloy he aa use in he eonomei esimaion efes o EU5 ounies an mosly omes fom he annual mao-eonomi aabase of he Euopean ommission (AMEO) an he OED naional aouns, in mos ases fo he peio beeen 960 an 203 he ax aes ae base on Euosa aa fo mos ounies fo he peio of 965-202 he efiniions of all vaiables an soues ae in Appenix D n ou eonomei esimaions, e fous only on he omponens of ovenmen expeniues ha ae pa of DP hese ae he oss apial fomaion, he iniviual onsumpion expeniue an he olleive onsumpion expeniue of he eneal ovenmen On aveae, an onsiue ouhly 50 pe en of oal ovenmen expeniue in ou sample An impoan pa of he emainin ovenmen expeniues ae soial benefis in ash an ohe uen ansfes hese have been inlue in ou heoeial moel (see seion 2) bu no in ou empiial esimaions ue o limie aa availabiliy (e soial benefis in ash sa only in 995 fo mos EU5 ounies) Moeove in ou eonomei esimaions e inlue only he ax evenues, hih ae he bies pa of ovenmen evenues leavin asie ohe evenue seams suh as popey inome o naional insuane paymens We esimae sepaae sinle equaions fo onsumpion invesmen expos impos omesi pies an expo pies We hoose he sinle equaion appoah (SEA) appoah beause i allos a leae inepeaion of he esuls an pemis us o eal ih he fa ha he ime peio of ou sample is quie sho Hoeve he main limiaion of he SEA appoah is ha i mih inoue some bias esulin fom enoeneiy issues hih mih aise fom he fa ha he ae shae an he ovenmen expeniue-o-dp aio ae auably a funion of oupu hese oul be akle by usin a VAR o an insumenal vaiable meho Hoeve, as isusse in Onaan an Obs (206), hese mehos have hei on limiaions Mos impoanly, i is neessay o have a lae numbe of obsevaions hih is no he ase in ou sample Hene e have hosen o use a SEA appoah hih is also in line ih he fa ha ou moel is a sho-un one an e have easonably assume ha he ime la of he impa of oupu on isibuion an ovenmen expeniue is lone han one yea 7
Uni oo ess sues ha mos of ou vaiables ae ineae of oe one 4 he pofi shae is saionay in Denmak eee Spain Seen an he UK Hene e use his vaiable in is level in hese ounies We fis esimae eo-oeion moels (EM) f no oineaion is foun, he equaions ae esimae in iffeenes We sa ih eneal speifiaions an only keep hose vaiables hih ae saisially sinifian n oe o es fo auooelaion e use he Beush-ofey es n he ase of auooelaion, eihe e keep he lae epenen vaiable o a an AR() em As ouline in Onaan an Obs (206), e eive he lon-em oeffiiens (elasiiies) usin o iffeen mehos epenin on hehe hee is a sho-un (iffeene fom) o a lon-un elaionship (EM) amon he vaiables 4 Esimaion esuls he esimaion esuls fo ou onsumpion funion (equaion ) ae iven in able he hypohesis ha he mainal popensiy o onsume (MP) ou of pofi inome is lae han he popensiy o onsume ou of ae inome is onfime in all ounies able able 2 pesens he effes on pivae invesmen base on equaion (2) hee ae posiive saisially sinifian effes of ovenmen expeniue in 9 EU ounies: Ausia Finlan eee emany elan he Nehelans Poual Spain an Seen his epesens he vas majoiy of ou sample an hene iniaes he impoane of fisal expansion fo he simulus of pivae invesmen hee is only one ouny (Fane) in hih he effes of ovenmen expeniue on pivae invesmen ae neaive 5 able 2 We fin son an sinifian aeleao effes of pivae eman on pivae invesmen in all ounies Reain he afe-ax pofi shae he effes ae moe vaie has no saisially sinifian effe in 9 ounies: Ausia Denmak Finlan emany eee elan Poual Spain an he UK 6 n hese ases, he effes ae eae as zeo hen e alulae he oal effes on exess eman We fin sinifian neaive effes of an 4 Resuls ae available upon eques 5 We also foun neaive sinifian effes fo he UK in he full sample 960-202 in some speifiaions Hoeve hen unnin a obusness hek ih a eue sample pio o he isis (960-2007) he sinifian neaive effes in he UK o no hol ue Hene e epo he speifiaion hee ovenmen expeniue is insinifian an oppe Fo Fane he neaive effes of ovenmen expeniue hol ue also in he eue sample hene e keep he oiinal esimaion 6 When e ompae ou esuls o pevious finins in he empiial lieaue (Onaan an Obs 206) e fin a eneal beakon of he pofi-invesmen nexus sine he sa of he ea Reession in 2007 akin afe-ax pofis his issue beomes even moe appaen Only 5 EU ounies have a saisially sinifian pofiabiliy effe 8
inease in publi eb on pivae invesmen hih epesens eviene of oin ou effes in 8 ounies: Belium Finlan Fane elan Poual Spain Seen an he UK Appenix E epos he esimaions fo invesmen speifiaion (2 ), hih eomposes he ovenmen expeniue in an As ouline in seion 2, his speifiaion is heoeially ou pefee one bu ue o he sho ime seies aa an muliollineaiy issues he esimae oeffiiens ae no use fo he poliy analysis in he nex seions he esuls sho ha publi invesmen has sinifian posiive effes on pivae invesmen in he majoiy of he EU5 ounies niviual an olleive ovenmen onsumpion expeniues have sinifian posiive effes on pivae invesmen in some ounies ( in Denmak, eee, he Nehelans, Seen, an in Ausia, Fane, elan, aly, an Poual) bu in some ohe ounies he effes ae eihe insinifian o even neaive he esimaion esuls fo omesi pies expo pies expos an impos ae epoe in ables 3 o 6 he esuls ae in line ih ou expeaions; hoeve hee ae no sinifian effes of expo pies elaive o impo pies on expos in Belium elan Luxembou he Nehelans an Poual We also fin no saisially sinifian effes of omesi pies elaive o impo pies on impos in Denmak, Finlan, emany, eee Luxembou, an he UK An inease in ovenmen expeniue leas o an inease in impos in 6 ounies: Belium, emany, elan, Poual, Seen, an he UK Reain R on onsumpion e fin saisially sinifian effes on omesi pies in 7 ounies: Finlan, elan, aly, Poual, Spain, Seen, an he UK onenin expo pies e fin saisially sinifian effes in only 3 ounies: Denmak, emany an aly able 3 able 4 able 5 able 6 We have un a seies of obusness heks fo onsumpion an invesmen esimaions 7 Fo onsumpion, e have heke he obusness of ou esuls usin iffeen sample sizes: 960-2007; 980-2007; 980-202 Ou esuls ae obus exep fo Spain Hee e fin eihe insinifian o pevese effes of pofi inome on onsumpion fo he full sample hih is a os ih ou pevious esimaions an he empiial lieaue (Onaan an Obs, 7 Resuls ae available upon eques 9
206) 8 Hene, e have kep he full sample fo all EU5 ounies, bu Spain, hee esimaion is base on he pe-isis peio n he ase of invesmen, he esuls ae obus if e esimae speifiaion 2 fo he pe-isis peio of 960-2007 5 Effes of ae an fisal poliies Usin ou eonomei esimaions e simulae he effes of a %-poin eease in he pofi shae ( ) on aeae eman, pivae invesmen,an pimay bue balane (poliy ; see Appenies A an B fo eails) We onsie boh he ase in hih his eease akes plae only in one ouny iniviually an he ase in hih he pofi shae eeases in all ounies in he EU5 simulaneously able 7 pesens he esuls olumn A epos ho exess eman hanes as a esponse o an iniviual eline in he pofi shae of a ouny hih is he sum of he paial effes of he pofi shae on onsumpion invesmen ovenmen expeniue an ne expos as a aio o DP hese paial effes ae pesene in able F in Appenix F (noe ha he ovenmen expeniue/dp oes no hane hen elines) hee poins ae oh menionin Fis in he majoiy of ounies he posiive paial effes of a eease in on onsumpion ae hihe in ompaison ih he esuls pesene in Onaan an Obs (206) his is explaine by he inopoaion of axes aes in he moel hih ens o inease he iffeenes in he popensiies o onsume ou of aes an pofis Seon he paial effe on invesmen of an inease in is eihe posiive o saisially insinifian hi, all ounies, exep Belium, exhibi a ae-le eman eime neesinly, inopoain he effes of on ne expos oes no hane he naue of he eman eime ompae o he omesi eman eime able 7 olumn B epos he muliplies hih apue he seon-oun effes of he hane in eman inue by he eline in Wih he exepion of Luxembu, he muliplies ae above one an ane beeen 4 (elan) an 505 (eee) 9 n ompaison o he muliplies esimae in Onaan an Obs (206) hee fisal poliy as no aken ino aoun he muliplies epoe in able 7 ae hihe fo all ounies Noe ha he inopoaion of fisal poliy ens o inease he muliplie beause a ise in oupu ineases (sine is fixe) an eeases he ovenmen eb-o-dp aio Boh of hese effes 8 Esimain a eue sample size (960-2007) shos ha he pevese effes ae iven by he sinifian euion of R on apial fom 42% o 26% uin he isis peio 9 Sokhamme e al (2009) fin muliplies anin beeen 38 an 269 fo he Euo aea 0
inease pivae invesmen Hoeve i also ens o eease he muliplie beause a ise in ineases impos olumn shos he effes of a %-poin fall in on eman an oupu afe he muliplie effes he ounies in hih he posiive oh effes of a eline in ae sone ae eee Spain an emany Mos impoanly, hen he eline in akes plae in all ounies simulaneously (olumn ) he oh effes ae einfoe n aiion, he only ouny (Belium) in hih aeae eman as pofi-le also exhibis no ae-le oh Oveall, a simulaneous eline in he pofi shae in all ounies leas o an inease in he EU5 DP by 64% 0 olumn D efes o pivae invesmen A % fall in impoves pivae invesmen in he majoiy of EU5 ounies (ih he exepion of Belium, aly, an he Nehelans) When his fall akes plae in all ounies simulaneously (olumn H) pivae invesmen impoves in all ounies On aveae, pivae invesmen in he EU5 ineases by 050%-poins as a aio o DP A fall in leas o an impovemen in he pimay bue balane in all ounies (olumn E) hese posiive effes ae einfoe hen elines simulaneously in all ounies (olumn ) A %-poin simulaneous fall in leas o an impovemen in he pimay bue balane of all ounies ue o he fa an inease in he ae shae has posiive effes on DP he effes ane fom 005%-poins (UK) o 09%-poins (Spain) Finally e analyse he exen o hih a ae simulus in he EU5 ounies oul exe inflaionay pessues Pies inease by ouhly 3% folloin an isolae eline in by %-poin (olumn F) an by 5% if elines simulaneously in all ounies (olumn J) Hene he ise in inflaion beause of a ae simulus is quie moeae We no un o he effes of fisal poliy Poliy 2 apues he inease in he ovenmen expeniue-o-dp aio ( ) by %-poin he effes of his poliy ae pesene in able 8 An inease in in eah ouny iniviually ineases DP sinifianly As shon in olumn he effe anes fom ouhly 056% (Luxembu) o 783% (eee) he effes beome muh moe posiive hen all ounies inease ovenmen expeniues simulaneously (olumn F) his is ue o hih oss-ouny spillove effes Oveall he EU5 DP ineases by 37% 0 Onaan an Obs (206) foun a eline in EU5 DP by 030% folloin a % fall in he ae shae in Euope he empiial sinifiane of spill-ove effes as ell as he impoane of ooinaion of fisal poliies is also onfime in Auebah an oonihenko (203)
able 8 An inease in ovenmen expeniue also leas o a ise in invesmen (olumn D) iniain ha he oin-in effes ovepoe he oin-ou effes Aain he effe is sone hen fisal poliy is implemene in ooinaion as oppose o in isolaion (olumn ) Hoeve as shon in olumn E a %-poin inease in leas o a eeioaion of he pimay bue in almos all ounies (he only exepion is Spain) he euion anes fom 047%-poins (Ausia) o 098%-poins (eee) his euion is hoeve loe hen ovenmen spenin ineases in all ounies simulaneously (see olumn H) Poliy 3 efes o a %-poin inease in R on apial inome ( ) s effes ae epoe in able 9 As a esul of an isolae ise in, oupu eeases in all ounies exep in Finlan (olumn ) his euion is slihly sone hen ineases simulaneously in all ounies (inluin Finlan) Oveall EU5 DP oul eease by 03% As expee, a hihe eues onsumpion an pivae invesmen an impoves he pimay bue balane (see olumns an H) able 9 able 0 shos he effes of poliy 4 hih apues a %-poin eease in R on labou inome ( ) his poliy has a sinifian posiive effe on onsumpion hih leas o boh hihe oupu an pivae invesmen When i is implemene simulaneously in all ounies, i auses, on aveae, an inease in he EU5 DP by 68% (see olumn F) an an inease in he EU5 pivae invesmen by 056%-poins (see olumn ) neesinly, he pimay bue balane impoves as a esul of poliy 4 (see olumns E an H) he son posiive effes on onsumpion esul in a sinifian inease in he evenues ha ome fom he axaion of onsumpion his ounebalanes he eease in he axes on labou able 0 6 Poliy mix senaios fo ealiaian oh an susainable fisal poliies n his seion, e se ou he effes of hee poliy mixes: (a) a ombinaion of po-labou ae poliy an expansionay fisal poliy base on a %-poin inease in he pe-ax ae shae an a %-poin inease in publi spenin (poliy mix ); (b) a ombinaion of a poessive ax poliy base on a %-poin fall in he ax ae on aes an a %-poin inease in he ax ae on pofis (poliy mix 2), an () a poliy mix ha ombines poliies 2
-4 (poliy mix 3) he effes ae pesene in able We onsie only he ase in hih hese poliy mixes ae implemene simulaneously in all ounies able olumn A shos ha a ombine inease in he ae shae an ovenmen expeniue has lae posiive effes on oupu of eah naional eonomy ih values anin beeen 240% (elan) an 345% (eee) Oveall he EU5 DP oul inease by 535% olumn B pesens he impa of poliy mix 2 he posiive effes of a fall in he R on labou inome on onsumpion oueih he neaive effes of a ise in he R on apial inome on pivae invesmen as ell as onsumpion All ounies expeiene posiive effes ih values anin beeen 052% (elan) an 34% (Spain) Oveall EU5 DP ineases by 37% he effes of poliy mix 3 ae sones in Finlan (204%), eee (529%), an Spain (65%) (see olumn ) As shon above, in hese ounies hee ae lae iffeenes in MP no sinifian effe of on pivae invesmen an he oin-in effes on pivae invesmen ae son Oveall, he EU5 DP ineases by 672% hih is sinifianly hihe han he ohe ases illusain he impoane of a moe ompehensive poliy mix of ae, axaion an invesmen poliies Poliy mix 3 also leas o hihe pivae invesmen in all ounies (see olumn D) he effes ae sones in ounies ih sinifian posiive effes of ovenmen expeniue on pivae invesmen; fo insane i ineases by 363%-poins in Ausia o 592%-poins in Finlan he effes ae eake in ounies ihou sinifian posiive effes of ovenmen expeniue on pivae invesmen bu ih sinifian neaive effes of publi eb, suh as in Belium (098%-poins) o in he UK (094%-poins) Finally e esimae he impa of poliy mix 3 on he pimay bue balane-o-dp aio (see olumn E) his poliy mix ineases he pimay bue balane in all ounies On aveae, he bue balane in he EU5 ounies impoves by 086%-poins 7 onlusion his pape evelope a muli-ouny pos-kalekian heoeial moel aumene by a ovenmen seo he moel as esimae fo EU5 ounies an he esuls ee use o examine he effes of ae an fisal poliies on oh, invesmen an bue balane he empiial analysis has shon ha a simulaneous eline in he ae shae in a hihly ineae Euopean eonomy leas o a eline in oh hee is oom o simulae 3
eman in an eonomi limae of sluish oh: a %-poin simulaneous inease in he ae shae a he Euopean level oul lea o an inease in EU5 DP by 64% he neaive effes of a fall in he ae shae on onsumpion ovepoe he posiive effes on invesmen in 4 Euopean ounies When onsiein afe-ax inome he iffeenes in mainal popensiy o onsume ou of ae vesus pofi inome ae sinifianly lae in he majoiy of he EU5 ounies ompae o he pevious empiial lieaue Moeove he eneal beakon of he pofi-invesmen nexus beomes even moe appaen hen invesmen is esimae as a funion of afe-ax pofis Hene omesi eman is lealy ae-le in he EU5 neesinly ineain he foein seo oes no lea o a hane in he impa of isibuion on eman sine omesi eman is sonly ae-le heefoe, in isolaion, ihou he inenaional spill-ove effes, e fin 4 ounies o be ae le an ouny o be pofi-le We fin eviene fo boh oin-in an oin-ou effes of fisal spenin on pivae invesmen On he one han, ovenmen expeniue enhanes pivae invesmen in 9 EU5 ounies On he ohe han, publi eb has a neaive effe on pivae invesmen in 8 ounies Hoeve he neaive effes of publi eb ae small ompae o he posiive effes of publi spenin iniain ha pivae invesmen is oveall posiively affee by fisal expansion As an ouome of a ae-le eovey senaio, he majoiy of he ounies oul expeiene ineasin pies bu by ell belo 2% his implies ha if he inflaion ae is iniially lose o 0% a ae simulus in he EU5 oul no lea o an inflaion ae hihe han he EB ae inflaion ae of 2% n fa, i oul help keep he Euopean eonomy aay fom eflaion A ombine an simulaneous hane of a %-poin inease in he pe-ax ae shae an %-poin inease in publi spenin leas o an inease in he EU5 DP by 535% an hene iniaes he impoane of a ompehensive poliy mix ha ombines ae-le an publi invesmen poliies in Euope he impa of ealiaian ae poliies ae posiive bu small; hoeve hen mixe ih he muh sone impa of fisal expansion he oveall simulus is muh moe effeive in ahievin boh aes of inome equaliy an son job eaion he hypohesis ha a moe poessive ax sysem poenially simulaes eman is onfime in ou empiial esimaions A eisibuive ax poliy leas o an inease in EU5 DP by 37% he posiive effes of a euion of he ax ae on aes 4
sinifianly inue onsumpion an hus oueih he neaive effes on invesmen spenin (an onsumpion eman) ue o an inease in he axaion of pofi inome Finally e simulae he impa of a ombine poliy mix ha inlues a po-labou ae poliy, an expansionay fisal poliy an a poessive ax poliy As expee, his poliy mix leas o muh sone oh effes an ineases he EU5 DP by 672% We also analyse he impa of expansionay fisal poliy on he pimay bue balane A ombine poliy mix leas o an impovemen in he bue balane in all he EU5 ounies he posiive muliplie effes on eman an oh lea o a ise in axes ha oueihs he avese effes of hihe ovenmen spenin on he bue balane On aveae, he bue balane impoves by 069%-poins in he EU5 ounies Hene expansionay fisal poliy is susainable hen ae an publi spenin poliies ae ombine ih poessive ax poliy; he impa is sone hen hese poliies ae implemene in a ooinae fashion aoss Euope ue o son posiive spill-ove effes on eman Oveall ou analysis shos ha he inopoaion of axes on apial an labou in he pos-kalekian open eonomy moel ineases he likelihoo of a ae-le eman eime n aiion, he ineaion of publi spenin ineases he muliplie effes an amplifies he ae-le ouome his hihlihs he impoane of he ombinaion of fisal poliy ih poliies aein a moe equal inome isibuion his ombinaion is impoan no only fo ahievin hihe oh, hihe invesmen an moe susainable fisal sanes, bu also fo ahievin ohe uial soial an envionmenal aes suh as lo abon emissions an ene equaliy he ombine use of fisal an ae poliies fo he ahievemen of hese aes an be he subje of fuue eseah 5
Refeenes AMEO 206 Annual mao-eonomi aabase of he Euopean ommission Available a: hp://eeuopaeu/eonomy_finane/ameo/use/seie/seleseiefm [Aesse 03206] Auebah A J an oonihenko 203 Oupu spilloves fom fisal poliy he Ameian Eonomi Revie 03:4-46 Bao R J 2000 nequaliy an oh in a panel of ounies Jounal of Eonomi oh 5:5-32 Be A Osy J D an Zeelmeye J 202 Wha makes oh susaine? Jounal of Developmen Eonomis 98:49-66 Blanha O J 2006 Maoeonomis Ne ok Penie Hall Blanha O J an Leih D 203 oh foeas eos an fisal muliplies Ameian Eonomi Revie 03:7-20 Bleke R A 999 Kalekian mao moels fo open eonomies n: Depez J an Havey J (es) Founaions of nenaional Eonomis: Pos Keynesian Pespeives hap 5 Lonon Roulee Bleke R A 2002 Disibuion Deman an oh in Neo-Kalekian Mao Moels n: Seefiel M (e) he Eonomis of Deman-Le oh: hallenin he Supply-Sie Vision of he Lon Run helenham UK an Nohampon MA: Ea Ela ommenaoe P Panio an Pino A 20 he influene of iffeen foms of ovenmen spenin on isibuion an oh Meoeonomia 62:-23 Dauey E an aia-penalosa 2007 he pesonal an he fao isibuions of inome in a oss-seion of ounies Jounal of Developmen Suies 43:82-829 Du A K 203 ovenmen spenin aeae eman an eonomi oh Revie of Keynesian Eonomis :05-9 Euopean ommission 2000 Suues of he axaion sysems in he Euopean Union 970-997 Bussels: Euopean ommission Euosa 205 Daabase online ou key o Euopean saisis Available a: hp://eeuopaeu/euosa/eb/pous-aases/-/e009 [Aesse 2205] ehe S 205 Wha fisal poliy is mos effeive? A mea-eession analysis Oxfo Eonomi Papes 67:553-580 Hein E an Voel L 2008 Disibuion an oh eonsiee: empiial esuls fo six OED ounies ambie Jounal of Eonomis 32:479-5 Hein E 206 Auonomous ovenmen expeniue oh efiis eb an isibuion in a neo-kalekian oh moel eam- Wokin Pape Seies N 2/206 Available a: hp://eonpapesepeo/pape/snpape/206-02hm [Aesse 2205] Menoza E Milesi-Feei an Asea P 997 On he ineffeiveness of ax poliy in alein lon-un oh: Habee s supeneualiy onjeue Jounal of Publi Eonomis 66:99-26 Mo an Slaey E 994 ax iniene an maoeonomi effes in a Kalekian moel hen pofis finane affes invesmen an pies may espon o axes Jounal of Pos Keynesian Eonomis 6:39-409 Naasepa W an Som S 2006 OED eman eimes (960-2000) Jounal of Pos Keynesian Eonomis 29:2-246 OED 206 Naional Aouns Available a: hps://sasoeo/nexaspx?daaseoe=naa [003206] Onaan Ö Sokhamme E an afl L 20 Finanialisaion inome isibuion an aeae eman in he USA ambie Jounal of Eonomis 35:637-66 Onaan Ö Boesh V an Leibeh M 202 Ho oes lobalizaion affe he implii ax aes on labo inome apial inome an onsumpion in he Euopean Union? 6
Eonomi nquiy 50:880-904 Onaan Ö an alanis 204 nome isibuion an oh: a lobal moel Envionmen an Plannin A 46:2489-253 Onaan Ö an Obs 206 Wae-le oh in he EU5 membe-saes: he effes of inome isibuion on oh invesmen ae balane an inflaion ambie Jounal of Eonomis 40:57-55 Palley 2009 mpos an he inome-expeniue moel: impliaions fo fisal poliy an eession fihin Jounal of Pos Keynesian Eonomis 32:3-322 Palley 203 ambie an neo-kalekian oh an isibuion heoy: ompaison ih an appliaion o fisal poliy Revie of Keynesian Eonomis :79-04 Palley 204 Rehinkin ae vs pofi-le oh heoy ih impliaions fo poliy analysis MK Wokin Pape Duesselof Rohon R 98 Deman eal aes an eonomi oh hames Papes in Poliial Eonomy Auumn -39 epine in Sui Eonomii (982) 8:3-54 Seuino S 202 Maoeonomis human evelopmen an isibuion Jounal of Human Developmen an apabiliies 3:59-8 Sokhamme E 207 Deeminans of he ae shae: a panel analysis of avane an evelopin eonomies Biish Jounal of nusial Relaions 55():-3 Sokhamme E Onaan Ö an Eee S 2009 Funional inome isibuion an aeae eman in he Euo aea ambie Jounal of Eonomis 33:39-59 7
able onsumpion: epenen vaiable (equaion ) lo(- AR DW R 2 )R lo(- )W lo( - ) Sample A 000 03 0588 2073 0544 97-202 (3760) *** (3792) *** (5950) *** B 005 0094 0289 638 0339 97-202 (5795) *** (252) ** (407) *** DK 0007 0087 059 668 02 97-20 (434) (987) ** (3089) *** FN 007 006 0439 84 0553 966-202 (5386) *** (4455) *** (6445) *** F 004 0086 055 608 0535 97-202 (6307) *** (300) *** (5802) *** D 0005 0067 038 049 80 0634 966-202 (576) (73) * (37) *** (3726) *** R 008 090 0399 0375 957 0735 972-203 (3396) *** (3902) *** (569) *** (202) ** RL 00 029 0457 989 0472 97-202 (2036) ** (30) *** (5058) *** 004 02 03 0568 890 0657 972-202 (2867) ** (480) *** (3596) *** (3855) *** L 006 003 0350 74 0350 96-203 (4087) *** (345) *** (4920) *** NL 0000 0095 0338 059 92 0668 97-202 -(0040) (3340) *** (3673) *** (4878) *** P 008 0089 0574 82 059 97-202 (4495) *** (5287) *** (6867) *** E 0009 0072 0753 2449 0847 96-2007 (350) *** (236) ** (532) *** S 000 009 0236 0258 865 0282 962-202 (2640) ** (0666) (270) *** (924) * UK 00 0072 0626 030 2038 0682 967-202 (3268) *** (4288) *** (676) *** (205) ** Noe: -saisis ae epoe in he paenheses * ** an *** san fo 0% 5% an % sinifiane levels espeively Sine hee ae no aa fo R on apial inome in Luxembu he eession fo his ouny is esimae base on he pe-ax inome A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom 8
able 2 Pivae invesmen: epenen vaiable (equaion 2) lo(- lo p- lo - lo lo - lod/ lo(d / ) - lo - lo p - lo - lo(d / ) - DW R 2 )π - lo(- )π lo(- )π lo p AR Sample A -007 038 285 0630-068 935 0570 97-203 -(45) (433) (43) *** (724) * -(62) B -0004 0397 429-0393 607 0640 970-202 -(0402) (2667) *** (537) *** -(2766) *** DK 0075 0064 2342 2245 0754 96-202 (0855) (42) (0928) *** FN -050-0027 344-040 -023-0483 0265 0336-005 884 095 972-202 -(38) *** -(0394) (6958) *** -(2436) ** -(423) *** -(5203) *** (308) *** (3925) *** -(4063) *** F 007 077 390-0528 -0335 975 092 978-203 (2638) *** (3002) *** (9538) *** -(3076) *** -(5365) *** D -0364 00002 642 087 0327-027 027 200 0792 962-202 -(3457) *** (0002) (0578) *** (2228) ** (808) * -(2974) * (3397) *** R 0033 0084 696 0498-0259 2090 065 96-203 (0585) (63) (760) *** (829) * -(648) * RL 084 07 0575-0440 -0445 06 0280-024 72 0629 97-202 (038) (0970) (339) -(448) *** -(3262) * (958) * (95) * -(3007) *** -008 029 374 0333 924 0640 962-202 -(225) ** (722) * (8303) *** (243) ** L -0029 060 728 240 0273 963-203 -(420) (0675) (472) *** NL -0033 0254 549 0538 802 0578 962-203 -(2979) *** (2644) *** (7732) *** (864) * P -979-0069 2424 077 0588-0622 0993-079 2074 0728 974-202 -(3969) *** -(398) (6286) *** (838) * (965) ** -(3732) ** (3684) *** -(250) ** E -30 0094 2565 0408-023 -0359 0500 0398 770 0939 972-203 -(2528) ** (7) (3832) *** (258) ** -(3408) *** -(3792) ** (3540) *** (229) ** S 064 052 67 235-0206 629 0772 97-203 (869) * (2206) ** (7229) *** (2465) ** -(2593) *** UK -0659 0053 697-0203 -0388 0403 273 0785 972-202 -(2377) ** (32) (9743) *** -(2392) ** -(3680) ** (3542) *** Noe: -saisis ae epoe in he paenheses * ** an *** san fo 0% 5% an % sinifiane levels espeively Sine hee ae no aa fo R on apial inome in Luxembu he eession fo his ouny is esimae base on he pe-ax apial inome A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom 9
able 3 Pie eflao: epenen vaiable (equaion 9) lop m lop lo(ul ) AR DW R 2 m - lop - lo(ul ) - lo(+ ) Sample A 0005 046 0453 0286 920 085 962-203 (2433) ** (375) *** (5320) *** (4952) *** B 009 058 029 024 0573 239 083 962-203 (3985) *** (672) *** (497) *** (2456) *** (3662) *** DK 0008 083 0465 0249 2029 0865 962-203 (2423) ** (5266) *** (4037) *** (2698) *** FN 0009 0236 098 046 0742 966 0860 966-202 (2299) ** (572) *** (228) ** (5399) *** (2336) ** F 0004 0094 0633 094 795 0907 962-203 (78) * (3580) *** (4635) *** (624) * D 007 0032 0366 0697 205 084 962-203 (4498) *** (635) * (778) *** (8452) *** R 009 0462 0423 0000 758 080 962-203 (2870) *** (6435) *** (5932) *** RL 0030 0235 0334 003 0404 220 0753 97-202 (248) ** (2872) *** (252) ** (2309) ** (2727) *** 0028 0084 0445 0909 0902 2404 0958 97-202 (333) (4292) *** 8934 *** (325) *** (479) *** L 0024 0523-0482 0345 65 0479 962-203 (480) *** (5076) *** -(3605) *** (3284) *** NL 0007 052 0448 0255 997 080 962-203 (2492) ** (4599) *** (3656) *** (2687) *** P 0005 0206 099 0668 0768 645 092 98-202 (0982) (348) *** (3584) *** (924) *** (870) * E 0025 0078 0430 0640 0857 2257 0944 98-202 (97) ** (2700) *** (528) *** (2335) ** (7580) *** S 00 056 0225 0407 0628 590 0846 97-202 (3032) *** (395) *** (5372) *** (6697) *** (2553) ** UK 0002 0036 0380 0558 0565 236 0945 966-202 (0769) (206) (749) *** (29) *** (708) * Noe: -saisis ae epoe in he paenheses * ** an *** san fo 0% 5% an % sinifiane levels espeively A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom 20
able 4 Expo pie eflao: epenen vaiable (equaion 0) lop m lop m - lop x - lo(ul ) lo(ul ) - lo(+ f ) lop x - lo(ul ) - lop m - lo(+ f - ) AR DW R 2 Sample A 0002 066 052 2339 0867 96-203 (060) (5385) *** (3490) *** B 000 0789 0096 2037 0949 96-203 (0674) (2633) *** (920) * DK 250 0728 0445-0630 0384 023 989 0922 966-202 (3965) *** (8834) *** (66) * -(4344) *** (4262) *** (3904) *** FN -0003 0776 085 569 0879 96-203 -(08) (5279) *** (262) *** F -0002 0528 042 0248 875 0956 962-203 -(025) (2465) *** (3074) *** (424) *** D 0636 0378 093 0407-0267 033 0089 0325 778 0926 966-202 (2543) *** (3884) *** (38) *** (303) *** -(328) * (3683) *** (257) ** (3207) *** R 5 0828 054-05 0297 092 880 094 96-203 (3237) *** (2355) *** (63) * -(434) *** (3536) *** (3250) *** RL 0000 0708 07 2004 080 96-203 (0009) (0398) *** (946) * -000 0530 023 0202 0705-0470 2028 0962 966-202 -(0240) (33334) *** (3370) *** (2886) *** (757) * -(355) *** L 0024-000 0322 800 0076 962-203 (2389) ** -(0006) (704) * NL 0002 0229 0370 2008 07 962-203 (025) (877) * (823) * P 02 0666-0247 05-0235 -0486 0427 0044 292 0956 966-203 (67) (5640) *** -(2640) *** (296) -(3867) *** -(6498) *** (7425) *** (937) * E 00 0407 030 0320 0482 593 088 962-203 (07) (9092) *** (329) (372) *** (3905) *** S -0002 076 072 928 0877 96-203 -(066) (626) *** (2509) *** UK 0558 0577 036-0486 0377 00 667 0928 966-202 (305) *** (3998) *** (2084) ** -(4725) *** (4975) *** (372) *** Noe: -saisis ae epoe in he paenheses * ** an *** san fo 0% 5% an % sinifiane levels espeively A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom 2
able 5 Expos: epenen vaiable (equaion ) lo(p loe AR DW R 2 x /P m ) - lo(p x /P m ) lo Sample A -0028-728 234 778 0676 96-203 -(283) *** -(577) *** (9008) *** B -0029-085 235 876 0669 96-203 -(3264) *** -(0728) (0045) *** DK -0004-0627 540 78 0472 96-203 -(0483) -(358) *** (6445) *** FN -0068-0576 3428 0430 22 0486 962-203 -(3074) *** -(2003) ** (645) *** (3077) *** F -0020-0439 255 058 037 294 0725 962-203 -(78) * -(3075) *** (7689) *** (665) * (2684) *** D -007-0379 236 2022 0372 962-203 -(45) -(876) * (5376) *** R -0037-0729 297 664 0305 962-203 -(342) -(805) * (3968) *** RL 0043-078 04 035 896 089 962-203 (2223) ** -(0903) (255) ** (2608) *** -0053-0307 3006 966 0586 962-203 -(38) *** -(994) ** (8285) *** L -0033 087 2688 037 202 0388 963-203 -(62) (0789) (4893) *** (2064) ** NL -0027-0290 2445 0559 294 0725 962-203 -(268) *** -(38) (0955) *** (476) *** P -007 036 2409 0330 86 0420 963-203 -(0799) (354) (440) *** (2383) ** E -002-0277 2448 664 0426 96-203 -(085) -(224) ** (6029) *** S -0045-0508 275 0497 2037 0575 962-203 -(3009) *** -(295) *** (7877) *** (3832) *** UK 000-058 74 562 0453 96-203 (052) -(3708) *** (4696) *** Noe: -saisis ae epoe in he paenheses * ** an *** san fo 0% 5% an % sinifiane levels espeively A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom 22
able 6 mpos: epenen vaiable (equaion 2) lo(p /P m ) lo(p /P m ) - lom - lo lo p- lo lo - loe lom - lo(p /P m ) - lo p- lo - AR DW R 2 p Sample A -000 034 702 2256 0688 962-203 -(009) (985) ** (8983) *** B 0003 037-029 293 0584 0299 2 0740 962-203 (0436) (3794) *** -(2355) ** (7379) *** (2373) ** (757) * DK 004 0060 50 2050 0637 96-203 (239) ** (0498) (8823) *** FN 0003 035 496 2342 0760 962-203 (0474) (273) (2448) *** F 004 069-024 203 83 0823 962-203 (2486) ** (2388) ** -(3460) *** (838) *** D 002 0072 504 0284 548 066 962-203 (699) * (0763) (9087) *** (657) * R 000 003 038 0442 752 0572 962-203 (0067) (0553) (5743) *** (2497) ** RL -0493 040 0632 0479 0270 0320-0206 0307 859 0678 962-203 -(376) *** (3925) *** (3503) *** (2248) ** (835) * (2570) ** -(3265) * (3246) *** -0006 020 983 282 0689 96-203 -(070) (2329) ** (052) *** L 000-0025 230 246 0490 96-203 (07) -(068) (6925) *** NL -055 008 039 87 2036 0720 962-203 -(064) (395) *** (82) * (9365) *** P -4574 22 86 0726-034 -05 0597 86 0896 828 076 96-203 -(487) *** (3683) *** (6464) *** (2986) *** -(2598) *** -(7969) *** (3583) *** (6464) *** (6409) *** E 000 0244 2220 602 0652 962-203 (0096) (227) ** (8222) *** S -2760 449 0526-048 0223 062 0202 97 0763 96-203 -(548) *** (206) *** (690) * -(504) *** (4262) *** (452) *** (395) *** UK -3542 005 263 0788-054 0787 0220 29 0782 962-203 -(4484) *** (0826) (053) *** (457) *** -(4633) *** (4720) *** (2806) Noe: -saisis ae epoe in he paenheses * ** an *** san fo 0% 5% an % sinifiane levels espeively A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom 23
able 7 he effes of an isolae an a simulaneous %-poin fall in he pofi shae (π) Noe: A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom * hane in eah ouny is muliplie by is shae in EU5 DP 24
able 8 he effes of an isolae an a simulaneous %-poin inease in ovenmen expeniue-o-dp (κ ) Noe: A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom * hane in eah ouny is muliplie by is shae in EU5 DP 25
able 9 he effes of an isolae an a simulaneous %-poin inease in R on apial inome ( ) Noe: A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom * hane in eah ouny is muliplie by is shae in EU5 DP 26
able 0 he effes of an isolae an a simulaneous %-poin eease in R on labou inome ( ) Noe: A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom * hane in eah ouny is muliplie by is shae in EU5 DP 27
able he effes of a simulaneous hane of he poliy mix in all ounies Noe: A = Ausia B = Belium DK = Denmak FN = Finlan F = Fane D = emany R = eee RL = elan = aly L=Luxembu NL = Nehelans P = Poual E = Spain S = Seen UK = Unie Kinom * hane in eah ouny is muliplie by is shae in EU5 DP 28
29 Appenix A Effes of isolae hanes in pofi shae an fisal poliy on aeae eman pivae invesmen an pimay bue balane A Effes of hanes in pofi shae he oal effe of a hane in pofi shae ( ) in equilibium aeae eman (AD) is iven by: NX (A) Diviin houh by : NX (A2) an (A3) (A4) NX NX NX (A5) (A6) he oal effe of on pivae invesmen/dp is alulae as: D D D D (A7) Subsiuin equaions (A3) (A7) (A5) an (A6) ino (A2) an solvin fo e obain: D D NX NX D (A8) n Equaion (A8) he em D D NX apues he muliplie effe an has o be posiive fo sabiliy he effe of an isolae %-poin inease in on peenae (%) hane in AD is equal o he muliplie imes he effe on exess eman ( NX D ) he mainal effe of on onsumpion/dp is iven by: W R W R W W R R (A9)
30 he mainal effe of he afe-ax pofi shae on pivae invesmen/dp is iven by: i (A0) he mainal effe of on afe-ax pofi shae is iven by: (A) he mainal effe of eb-o-dp aio on pivae invesmen/dp is iven by: D i D i D (A2) he mainal effe of on axes/dp is iven by: W R R W R W (A3) he mainal effe of on ne expos/dp is iven by: M X NX (A4) hee: ul X e e e X ul ul ul ul P P X X f Pul Pxul XPx x x lo lo lo lo lo lo lo lo ul M e e e M ul ul ul ul P P M M f Pul Pul MP lo lo lo lo lo lo lo lo he mainal effe of on eb-o-dp aio is iven by: D D D D (A5) he mainal effe of oupu on onsumpion is iven by: W R W W R R (A6) he mainal effe of oupu on pivae invesmen is iven by: D D i i i D D i i D D y p y p p (A7) he mainal effe of oupu on ne expos is iven by:
3 M m m M m M m M M M NX y p y p p (A8) he mainal effe of oupu on ovenmen expeniue is iven by: (A9) he mainal effe of oupu on axes is iven by: R W R W (A20) We alulae he oal effes of on pimay bue balane/dp as follos: PB o (A2) A2 Effes of hanes in ovenmen expeniue-o-dp aio oal effes of a hane in ovenmen expeniue/dp ( ) on equilibium AD is: NX (A22) Diviin houh by : NX (A23) We kno ha: (A24) (A25) NX NX NX (A26) (A27) he oal effe of on pivae invesmen/dp is alulae as: D D D D (A28)
32 Subsiuin equaions (A24) (A28) (A26) an (A27) ino (A23) an solvin fo e obain: D D NX NX D (A29) he effe of an isolae %-poin inease in on peenae (%) hane in AD is equal o he muliplie imes he effe on exess eman ( NX D ) he mainal effe of ovenmen expeniue on invesmen/dp is iven by: i (A30) he mainal effe of on ovenmen expeniue is iven by: (A3) he mainal effe of on ovenmen expeniue/dp is iven by: (A32) he mainal effe of on ne expos/dp is iven by: M m M NX (A33) he mainal effe of on eb-o-dp aio is iven by: D D D D (A34) We alulae he oal effes of on pimay bue balane/dp as follos: o PB (A35) A3 Effes of hanes in R on apial inome oal effes of a hane in R on apial inome ( ) on equilibium AD: NX (A36)
33 Diviin houh by : NX (A37) We kno ha: (A38) (A39) NX NX (A40) (A4) he oal effe of on pivae invesmen/dp is alulae as: D D D D (A42) Subsiuin equaions (A38) (A42) (A40) an (A4) ino (A37) an solvin fo We obain: D D NX D (A43) he effe of an isolae %-poin inease in on peenae (%) hane in AD is equal o he muliplie imes he effe on exess eman ( D ) he mainal effe of on onsumpion/dp is: R R R R (A44) he mainal effe of on afe-ax pofi shae is: (A45) he mainal effe of on axes/dp is: R R W (A46) he mainal effe of on eb-o-dp aio is:
34 D D D D (A47) We alulae he oal effes of on pimay bue balane/ as follos: o PB (A48) A4 Effes of hanes in R on labou inome oal effes of a hane in R on labou inome ( ) on equilibium AD: NX (A49) Diviin houh by : NX (A50) We kno ha: (A5) (A52) NX NX (A53) (A54) he oal effe of on pivae invesmen/dp is alulae as: D D D D (A55) Subsiuin equaions (A5) (A55) (A53) an (A54) ino (A50) an solvin fo e obain: D D NX D (A56) he effe of an isolae %-poin inease in on peenae (%) hane in AD is equal o he muliplie imes he effe on exess eman ( D )
35 he mainal effe of on onsumpion/dp is iven by: W W W W (A57) he mainal effe of on axes/dp is iven by: W R W (A58) he mainal effe of on eb-o-dp aio is iven by: D D D D (A59) We alulae he oal effes of on pimay bue balane/ as follos: o PB (A60)
Appenix B Effes of simulaneous hanes in pofi shae an fisal poliy on aeae eman pivae invesmen an pimay bue balane B Effes of hanes in pofi shae We moel a %-poin inease in pofi shae on he peenae (%) hane in DP of eah ouny as follos (B) E 55 is a maix hose iaonal elemens ae he effe of a hane in in ouny j on exess eman in ouny j: E 55 D 0 0 NX 0 0 5 5 5 5 5 5 D 5 0 5 5 5 5 5 5 5 NX 5 5 5 i i i i i hee is efine in equaion (A9) is efine in equaion (A0) is efine i i i i i i i in equaion (A) is efine in equaion (A2) is efine in equaion (A3) Di i i NXi i an is efine in equaion (A4) i Maix H 5 5 efles he naional muliplie effes an hene shos he effe of an auonomous hane in exess eman: H 55 hee i i equaion (A8) NX D 0 0 is efine in equaion (A6) i i D 0 0 i i is efine in equaion (A9) an 5 5 5 5 NX 5 5 5 5 0 is efine in equaion (A7) i i 5 5 5 5 5 D5 5 5 5 5 NX i i is efine in equaion (A20) D is efine in Maix P 55 illusaes he effe of a hane in ae panes on impo pies an hene on ne expos in eah ouny P 55 0 NX2 NX5 2 5 M M 2 2 M M 5 5 NX 2 NX5 2 5 M M 2 M M 25 5 NX 5 0 M M 5 36