Changes in the fiscal stance and the composition of public spending
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We consider the impact of both cyclical and structural changes in the fiscal stance on public spending composition for a panel of EU countries, including individual components of public investment. We find that both cyclically induced and structural changes in the fiscal stance affect the composition of public spending, with fiscal tightening of both types increasing the relative share of investment and loosening favouring consumption expenditure. Of the components of public investment, infrastructure and redistribution respond to cyclical changes in the fiscal stance, while investment in hospitals and schools responds most clearly to structural changes.
KeywordsFiscal policy Public expenditure Fiscal stance
JEL ClassificationE62 H50 H62 C33
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