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Fiscal Activism In European Regions: Evidence On Fiscal Rules Before And After The Euro

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  • Georgios KARRAS

    (Department of Economics, University of Illinois at Chicago, 601 S. Morgan St., Chicago, IL 60607 7121)

Abstract

The introduction of the euro has been followed by noticeable fiscal divergence between the core and the periphery economies. This paper investigates the basic properties of fiscal policy in Europe and asks whether these properties are affected by euro membership. The empirical findings suggest that fiscal policy has been decisively countercyclical and generally sustainable. Adopting the euro raises the average country member's primary deficit by about 0.5% of GDP within a year and the effect accumulates to 1.76% of GDP ten years later, but these dynamic responses are far more pronounced in the periphery economies than in the core.

Suggested Citation

  • Georgios KARRAS, 2015. "Fiscal Activism In European Regions: Evidence On Fiscal Rules Before And After The Euro," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 21-34, June.
    • Handle: RePEc:hrs:journl:v:vii:y:2015:i:1:p:21-34
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Fiscal Rules; Euro zone; Fiscal Policy;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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