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Has the Stability and Growth Pact Changed the Likelihood of Excessive Deficits in the European Union?

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  • S. Tolga Tiryaki

Abstract

This paper presents an empirical analysis of excessive deficit spells in the European Union using transition data methods. Probabilities of transition between excessive and nonexcessive deficit states are estimated with time-varying macroeconomic covariates as explanatory variables. The quantitative effects of discretionary fiscal and monetary policies and cyclical factors on transition probabilities are disentangled so that we can account for what factors and by how much they contributed to certain member countries' breaching of the Pact. Another finding is that the Stability and Growth Pact seems to have reinforced fiscal discipline in most of the member countries.

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Bibliographic Info

Article provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its journal Central Bank Review.

Volume (Year): 8 (2008)
Issue (Month): 1 ()
Pages: 65-83

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Handle: RePEc:tcb:cebare:v:8:y:2008:i:1:p:65-83

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Related research

Keywords: Stability and Growth Pact; Excessive deficits; Duration analysis; Discrete hazard models;

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References

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  1. Mark Mink & Jakob de Haan, 2006. "Are there Political Budget Cycles in the Euro Area?," European Union Politics, , vol. 7(2), pages 191-211, June.
  2. Masson, Paul R, 1996. "Fiscal Dimensions of EMU," Economic Journal, Royal Economic Society, vol. 106(437), pages 996-1004, July.
  3. A.J. Hughes Hallett & Peter McAdam, 2003. "Deficit Targeting Strategies: Fiscal Consolidation and the Probability Distribution of Deficits under the Stability Pact," Journal of Common Market Studies, Wiley Blackwell, vol. 41(3), pages 421-444, 06.
  4. Dornbusch, Rudi, 1997. "Fiscal Aspects of Monetary Integration," American Economic Review, American Economic Association, vol. 87(2), pages 221-23, May.
  5. Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
  6. Hallerberg, Mark & Strauch, Rolf & Hagen, Jürgen von, 2006. "The design of fiscal rules and forms of governance in European Union countries," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 150, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  7. V.V. Chari & Patrick J. Kehoe, 2003. "On the desirability of fiscal constraints in a monetary union," Staff Report 330, Federal Reserve Bank of Minneapolis.
  8. Uhlig, Harald, 2002. "One Money, but Many Fiscal Policies in Europe: What Are the Consequences?," CEPR Discussion Papers 3296, C.E.P.R. Discussion Papers.
  9. Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, vol. 109(458), pages 546-71, October.
  10. repec:imf:imfpdp:9607 is not listed on IDEAS
  11. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
  12. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
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Cited by:
  1. Sèna Kimm Gnangnon, 2012. "Structural Vulnerability and Excessive Public Indebtedness in CFA Franc Zone Countries," Working Papers halshs-00749470, HAL.
  2. Gnangnon, Sèna Kimm, 2013. "Structural vulnerability and excessive public indebtedness in CFA Franc Zone countries," Economic Modelling, Elsevier, vol. 35(C), pages 816-832.

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