A Synthesis of Empirical Research in the Sustainability of Fiscal Policy

Abstract. In the last twenty years many developed countries have faced significant public deficits, while the ability of government authorities to deal with public deficits has been receiving rising awareness from economists and policy makers. This is an imperative topic, in provisions of economics and public policy, and it is a central subject for the EMU area; hence, they are the main motivations of this paper. Theoretically, equilibrium growth paths have to be supported by adequate fiscal policy. The risk of a default on Greek sovereign debt during the last years has worried the Euro into its first serious crisis and raised the issue of debt sustainability in Europe. There is no universally accepted definition for sustainable fiscal policy. However, economists agree that expanding public debt is not sustainable. Budget policy is constrained by the need to finance the deficit. In this paper we provide a synthesis of empirical research in the validity of the Sustainability of Fiscal Policy of the existing literature for the period 1986-2012. These studies used both time series and panel data sets and empirically examined the Sustainability of fiscal policy for a single country and for a group of countries (multi-country studies). Furthermore, there are studies using data on government expenditure at the provincial or state level. Existing studies in this topic vary in the country selection. They used data for developed, developing countries or group of both, while most of them examined developed or industrial countries. All these studies found different empirical results: support, no support or mixed results.Keywords. Fiscal policy sustainability; Budget deficits; Government debt; cointegration; structural breaks.JEL. E62, H62, H63

The validity of Wagner’s Law in the United Kingdom for the period 1850-2010

The relationship between national income and government spending is one of the most debated topics between economists and policy makers during the last decades. The objective of this paper is to examine the Wagner’s law validity, and if it can be applied in the U.K. public spending expansion for the period 1850-2010. According to Wagner’s hypothesis, fundamental economic growth is a determinant to the public sector growth. The public sector is said to be able to grow at a very high rate when compared to the national income. The data covers a period in which U.K. economy faced increased economic growth, government spending and met most of the assumption of Wagner’s Law (industrialisation, urbanisation, increased population). Furthermore, the long data set ensures the reliability of our results in terms of statistical and economic conclusions. We apply unit root tests, unit root tests with structural breaks, cointegration techniques and Granger causality tests. Our results indicate a presence of a long run relationship between national income and government spending, while the causality is bi-directional, thus we find support of Wagner’s and Keynesian hypotheses

Fiscal Policy and Economic Growth, Empirical Evidence in European Union

Abstract. The role of Fiscal policy in the long run growth process has been crucial in macroeconomics since the appearance of endogenous growth models. Additionally, a significant debate among economists involves whether several types of spending or taxation enhance economic growth. The main objective of this paper is to highlight the relationship between fiscal policy and economic growth in the EU-15, and make an attempt to determine which of the fiscal policy instruments enhance economic growth.We deployed panel data techniques and included both sides of budget, spending and taxation, in our regressions and used the most recent dataset data for fiscal variables from Eurostat. We made a new classification of public expenditures into homogeneous groups in order to reduce the explanatory variables and increase the efficiency of our model and results since we have data for only 14 years. In our empirical analysis we included OLS, fixed effects models, random effects models and GMM estimators, the Arellano and Bond (1991) and the Arellano and Bover (1995) - Blundell and Bond (1998) estimators.On the first round of our regressions we find a negative impact of spending on human capital accumulation on economic growth. Our empirical results also indicate that an increase on government spending on infrastructure has a significant positive impact on the economy growth of a country. Additionally, in our regressions the variable government spending on property rights protections include spending on defence and spending on public order safety. Our empirical results from the first round of regressions imply a strongly negative relationship between these two variables. However, on the second round of our regressions we aggregate defence spending from spending on property right protection and we did not find any relationship between economic growth and defence spending. Moreover, we found a non-significant relationship between government spending on social protection and economic growth. On the second round of regressions, when we allow for non-linear growth effects we find a positive relationship with deficits and economic growth, which is in contrast with Ricardian Equivalence. We also included the employment growth and business investment in our model because labour and capital are very important factors of production in growth models. In our empirical results we do not find a significant impact of employment on economic growth, but when we allow for non-linear growth effects we find a strongly positive impact. However, we found that gross fixed capital formation of the private sector as a percentage of GDP in both rounds of our regressions, has no significant impact on economic growth. Finally,our empirical results do not support any evidence of relationship between openness and economic growth.Keywords. Panel Data. Fiscal Policy. Taxation. Government Expenditures.JEL. C23, C33, E62, H2, H5

Military Spending and Economic Growth in Greece and the Arms Race between Greece and Turkey

Abstract. One of the most important reasons that led Greece to the current macroeconomic instability is the high military spending during the last decades. Thus, it is necessary to examine the impact of military spending on economic growth for the case of Greece. Furthermore, it will be very useful to examine the arms race hypothesis between Greece and Turkey in order to identify if there is an interaction between these countries that leads to the high level of military spending. In this paper we empirically test the relationship between military spending and economic growth for Greece and Turkey during 1957-2013, and examine the validity of arms race hypothesis between the two countries. We deployed unit root tests, unit root tests with structural changes, cointegration techniques and finally Granger causality tests. Granger causality tests in the case of Greece and Turkey imply that the causality runs from military spending to economic growth, however we find that there is no evidence of causality between Greek and Turkish military spending, which mean that that these countries act independently.Keywords. National Government Expenditures, National Security and War, Arms race, Greece, Turkey,  Economic Growth,  ADF, VAR.JEL. H5, H56, O40, E62

RNA buffers the phase separation behavior of prion-like RNA binding proteins

Prion-like RNA binding proteins (RBPs) such as TDP43 and FUS are largely soluble in the nucleus but form solid pathological aggregates when mislocalized to the cytoplasm. What keeps these proteins soluble in the nucleus and promotes aggregation in the cytoplasm is still unknown. We report here that RNAcritically regulates the phase behavior of prion-like RBPs. Low RNA/protein ratios promote phase separation into liquid droplets, whereas high ratios prevent droplet formation in vitro. Reduction of nuclear RNA levels or genetic ablation of RNA binding causes excessive phase separation and the formation of cytotoxic solid-like assemblies in cells. We propose that the nucleus is a buffered system in which high RNA concentrations keep RBPs soluble. Changes in RNA levels or RNA binding abilities of RBPs cause aberrant phase transitions.1125sciescopu