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Fiscal Restraint and the Political Economy of EMU

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  • Rotte, Ralph
  • Zimmermann, Klaus F

Abstract

While the principle of delegation has become well established on the national level for monetary policy, fiscal policies remain in the hands of policymakers depending on rent-seeking interest groups. The authors argue that the Maastricht Treaty provides a unique international commitment that enables governments to follow restrictive fiscal policies by attributing their negative side effects to Europe and to implement austerity measures despite rising unemployment or a decline in growth. Hence, the popularity of the European idea is instrumented to enforce fiscal discipline. The paper outlines the political economy framework and presents new econometric evidence. Copyright 1998 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 94 (1998)
Issue (Month): 3-4 (March)
Pages: 385-406

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Handle: RePEc:kap:pubcho:v:94:y:1998:i:3-4:p:385-406

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  1. Tabellini, Guido & Alesina, Alberto, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Scholarly Articles 3612769, Harvard University Department of Economics.
  2. Mancur Olson, 1984. "Microeconomic incentives and macroeconomic decline," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 120(4), pages 631-645, December.
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  6. Veall, Michael R & Zimmermann, Klaus F, 1996. " Pseudo-R-[superscript 2] Measures for Some Common Limited Dependent Variable Models," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 241-59, September.
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  8. Eichenberg, Richard C. & Dalton, Russell J., 1993. "Europeans and the European Community: the dynamics of public support for European integration," International Organization, Cambridge University Press, vol. 47(04), pages 507-534, September.
  9. Crafts, Nicholas & Toniolo, Gianni, 1995. "Post-war Growth: An Overview," CEPR Discussion Papers 1095, C.E.P.R. Discussion Papers.
  10. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  11. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  12. Tollison, Robert D, 1982. "Rent Seeking: A Survey," Kyklos, Wiley Blackwell, vol. 35(4), pages 575-602.
  13. Alan J. Auerbach, 1994. "The U.S. Fiscal Problem: Where We Are, How We Got Here and Where We're Going," NBER Working Papers 4709, National Bureau of Economic Research, Inc.
  14. Eichengreen, Barry & Bayoumi, Tamim, 1994. "The political economy of fiscal restrictions: Implications for Europe from the United States," European Economic Review, Elsevier, vol. 38(3-4), pages 783-791, April.
  15. Olson, Mancur, Jr, 1995. "The Devolution of the Nordic and Teutonic Economies," American Economic Review, American Economic Association, vol. 85(2), pages 22-27, May.
  16. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
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Cited by:
  1. Dolls, Mathias & Peichl, Andreas & Zimmermann, Klaus F., 2011. "A Challenge for the G20: Globally Stipulated Debt Brakes and Transnational Independent Fiscal Supervisory Councils," IZA Discussion Papers 6160, Institute for the Study of Labor (IZA).
  2. Dolls, Mathias & Peichl, Andreas & Zimmermann, Klaus F., 2011. "Eine Herausforderung für die G20: Global vereinbarte Schuldenbremsen und transnationale fiskalpolitische Aufsichtsgremien," IZA Standpunkte 45, Institute for the Study of Labor (IZA).
  3. Spyros Blavoukos & George Pagoulatos, 2008. "Fiscal adjustment in Southern Europe: the limits of EMU conditionality," LSE Research Online Documents on Economics 5607, London School of Economics and Political Science, LSE Library.
  4. Richard Hule & Matthias Sutter, 2003. "Can the Stability and Growth Pact in EMU Cause Budget Deficit Cycles?," Empirica, Springer, vol. 30(1), pages 25-38, March.
  5. Baskaran, Thushyanthan, 2009. "Did the Maastricht treaty matter for macroeconomic performance?," MPRA Paper 30106, University Library of Munich, Germany.
  6. Spyros Blavoukos & George Pagoulatos, 2008. "Fiscal Adjustment in Southern Europe: the Limits of EMU Conditionality," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 12, Hellenic Observatory, LSE.

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