Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 1999:5: Fiscal Policy in Sweden: Effects of EMU Criteria Convergence

Abdulnasser Hatemi-J
Additional contact information
Abdulnasser Hatemi-J: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: This paper investigates the sustainability of fiscal policy in Sweden performed during the period 1963:01-1997:04. On the basis of Johansen's VAR and the augmented Granger causality tests, the results show that taxes and spending are causally related in the long-run and the homogeneity condition is supported empirically. The effect of EMU criteria convergence on fiscal policy is also investigated empirically. “Pantula principle” is applied for determining the form of deterministic trend component. Special attention is given to the lag-choosing process.

Keywords: Spending; revenue; Granger causality; cointegration; Johansen's VAR; EMU

JEL-codes: C32; H21; H62

27 pages, First version: September 21, 1999. Revised: November 1999.

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