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Macroeconomic effects of fiscal policy in the European Union, with particular reference to transition countries
Rilind Kabashi* 
Rilind Kabashi
Affiliation: Monetary Policy and Research Department, National Bank of the Republic of Macedonia, Skopje, Republic of Macedonia
 0000-0001-7597-6495
Correspondence
kabashir@nbrm.mk
Article | Year: 2017 | Pages: 39 - 69 | Volume: 41 | Issue: 1 Received: October 19, 2016 | Accepted: December 1, 2016 | Published online: March 10, 2017
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FULL ARTICLE
FIGURES & DATA
REFERENCES
CROSSMARK POLICY
METRICS
LICENCING
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Note: The size of the spending shock in the entire sample and in all sub-samples discussed below equals 1% of GDP, which is equivalent to around 4% of government spending in the entire sample.
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Forecast
error variance decomposition of GDP
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At
impact
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After 1 year
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After
3 years
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After
5 years
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Contributions
of shocks to:
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Real gov. spending
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8.4
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7.8
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5.7
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4.7
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Real cycl.-adj. net-taxes
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4.6
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10.8
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20.6
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25.7
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Real GDP
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87.0
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78.9
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66.1
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59.9
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GDP deflator
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0.0
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0.7
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1.9
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2.1
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Nom. Short-term rates
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0.0
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1.7
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5.7
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7.6
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100.0
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100.0
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100.0
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100.0
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Contributions
of the gov. spending chock
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At impact
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After 1 year
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After 3 years
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After 5 years
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To
the FEVD of:
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Real gov. spending
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100.0
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94.5
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72.7
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58.6
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Real cycl.-adj. net-taxes
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1.5
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0.9
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1.9
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2.8
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Real GDP
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8.4
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7.8
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5.7
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4.7
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GDP deflator
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0.8
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1.9
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3.1
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3.1
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Nom. Short-term rates
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0.5
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0.4
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1.0
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1.1
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Size
of the fiscal multiplier
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On
impact
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After
one year
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After
3 years
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After
5 years
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Baseline
(EU27, 1995-2012)
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1.0***
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1.1***
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0.4*
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-0.1
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Old
EU member states (EU17)
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0.6***
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1.0***
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0.6**
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-0.2
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New
EU member states (NMS10)
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1.3***
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1.4***
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1.0**
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0.9
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High debt (debt/GDP>60%)
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0.6***
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1.1***
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0.3
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-0.8*
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Low
debt (debt/GDP<60%)
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1.0***
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1.1***
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0.5*
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0.3
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High
openness (>50% of GDP)
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1.1***
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0.9***
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-0.2
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-0.6
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Low
openness (<50% of GDP)
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0.7***
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1.2***
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0.7**
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0.1
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Pre-crisis
(EU27, 1995-2008)
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0.4***
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0.3**
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-0.1
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-0.4
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Note: The table shows the size of the fiscal multiplier, i.e. the response of real GDP (in %) to a government spending shock of 1% of real GDP. ***, ** and * denote significance at the 1%, 5% and 10% level, respectively.
Note: Only responses of the additional variable in each of the four 6-variable PVARs are shown. Complete results of each specification are available on request.
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Variable
name
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Variable
description (original titles for variables not calculated by formula)
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Source
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ca_gov_nt_real
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Real
cyclically-adjusted net-taxes
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Formula
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ca_gov_rev
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Cyclically-adjusted
government revenues
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Formula
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ca_gov_rev_real
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Real
cyclically-adjusted government revenues
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Formula
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ca_gov_tran
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Cyclically-adjusted
government transfers
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Formula
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ca_gov_tran_real
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Real
cyclically-adjusted government transfers
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Formula
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cit_dir
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Share of
corporate income tax in direct taxes
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Formula
|
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comp_avg
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Nominal
compensation per employee: total economy
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AMECO
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comp_avg_real
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Real wages
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Formula
|
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comp_gg
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Compensation
of employees: general government :- ESA 1995
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AMECO
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comp_gg_cons
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Real
government wage bill
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Formula
|
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debt
|
General
government consolidated gross debt :- excessive deficit procedure (based on
ESA 1995) and former definition (linked series)
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AMECO
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debt/ngdp
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Debt/GDP
ratio
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Formula
|
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def_gc
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Price
deflator total final consumption expenditure of general government, 2005=100
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AMECO
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def_gdp
|
GDP deflator
(price deflator gross domestic product at market prices, 2005=100)
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AMECO
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def_gfcf
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Price
deflator gross fixed capital formation: total economy, 2005=100
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AMECO
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el_cit
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Elasticity
of corporate income tax with respect to the output gap
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EC (2005)
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el_dir
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Elasticity
of direct taxes with respect to the output gap
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EC (2005)
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el_ind
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Elasticity
of indirect taxes with respect to the output gap
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EC (2005)
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el_pit
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Elasticity
of personal income tax with respect to the output gap
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EC (2005)
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el_prexp
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Elasticity
of current primary expenditures with respect to the output gap
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EC (2005)
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el_soc
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Elasticity
of social contributions with respect to the output gap
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EC (2005)
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empl
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Employment (employees,
persons: all domestic industries; national accounts)
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AMECO
|
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expend_curr
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Total
current expenditure: general government :- ESA 1995
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AMECO
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expend_curr_pr
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Current
primary expenditures
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Formula
|
|
gc
|
Final
consumption expenditure of general government at current prices
|
AMECO
|
|
gc_cons
|
Real government
consumption
|
Formula
|
|
gc_nw_cons
|
Real
government non-wage consumption
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Formula
|
|
gdp_cons
|
Real GDP (gross
domestic product at 2005 market prices)
|
AMECO
|
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gdp_trend
|
Trend gross
domestic product at 2005 market prices (based on the Hodrick-Prescott filter)
|
AMECO
|
|
gfcf_gg
|
Gross fixed
capital formation at current prices: general government
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AMECO
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gfcf_gg_cons
|
Real
government investment
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Formula
|
|
gfcf_priv
|
Gross fixed
capital formation at current prices: private sector
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AMECO
|
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gfcf_priv_cons
|
Real private
investments
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Formula
|
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gov_spend_real
|
Real
government spending
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Formula
|
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gov_tran
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Government
transfers
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Formula
|
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inter
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Interest :
general government :- ESA 1995
|
AMECO
|
|
ir_st
|
Nominal
short-term interest rates
(note: the
series corresponds to nominal 3-month money market interest rates)
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AMECO and
IMF IFS
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m
|
Imports of
goods and services at current prices (national accounts)
|
AMECO
|
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ngdp
|
Nominal GDP
(gross domestic product at current market prices)
|
AMECO
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open
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Trade
openness
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Formula
|
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pc_cons
|
Real private
consumption (private final consumption expenditure at 2005 prices)
|
AMECO
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pit_dir
|
Share of
personal income tax in direct taxes
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EC (2005)
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prop_paid
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Property
income, payable
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Eurostat
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prop_rec
|
Property
income, receivable
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Eurostat
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rev_curr
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Total
current revenue: general government :- ESA 1995
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AMECO
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soc_ben_paid
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Social
benefits other than social transfers in kind: general government :- ESA 1995
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AMECO
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soc_rec
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Social
contributions received: general government :- ESA 1995
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AMECO
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subs
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Subsidies:
general government :- ESA 1995
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AMECO
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tax_dir
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Current
taxes on income and wealth (direct taxes): general government :- ESA 1995
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AMECO
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tax_ind
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Taxes linked
to imports and production (indirect taxes): general government :- ESA 1995
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AMECO
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trpg
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Other
current transfers paid by government
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Formula
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trrg
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Other
current transfers received by government
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Formula
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x
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Exports of
goods and services at current prices (national accounts)
|
AMECO
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March, 2017
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