Advanced Search
MyIDEAS: Login to save this paper or follow this series

Real-time determinants of fiscal policies in the euro area: Fiscal rules, cyclical conditions and elections

Contents:

Author Info

  • Roberto Golinelli

    ()
    (University of Bologna, Department of Economics)

  • Sandro Momigliano

    ()
    (Bank of Italy, Economic Research Department)

Abstract

We examine the impact of four factors on the fiscal policies of the euro-area countries over the last two decades: the state of public finances, the European fiscal rules, cyclical conditions and general elections. We rely on information actually available to policy-makers at the time of budgeting in constructing our explanatory variables. Our estimates indicate that policies have reacted to the state of public finances in a stabilizing manner. The European rules have significantly affected the behaviour of countries with excessive deficits. Apart from these cases, the rules appear to have reaffirmed existing preferences. We find a relatively large symmetrical counter-cyclical reaction of fiscal policy and strong evidence of a political budget cycle. The electoral manipulation of fiscal policy, however, occurs only if the macroeconomic context is favourable.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td06/td609_06/td609/en_tema_609.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 609.

as in new window
Length:
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:bdi:wptemi:td_609_06

Contact details of provider:
Postal: Via Nazionale, 91 - 00184 Roma
Web page: http://www.bancaditalia.it
More information through EDIRC

Related research

Keywords: fiscal policy; real-time information; euro-area countries; stabilisation policies; fiscal rules; political budget cycle;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 533-572, October.
  2. Marco Buti & Lucio R. Pench, 2004. "Why Do Large Countries Flout the Stability Pact? And What Can Be Done About It?," Journal of Common Market Studies, Wiley Blackwell, vol. 42(5), pages 1025-1032, December.
  3. Athanasios Orphanides & Simon Van_Norden, 2000. "The Reliability of Output Gap Estimates in Real Time," Econometric Society World Congress 2000 Contributed Papers 0768, Econometric Society.
  4. Lorenzo Forni & Sandro Momigliano, 2004. "Cyclical sensitivity of fiscal policies based on real-time data," Temi di discussione (Economic working papers) 540, Bank of Italy, Economic Research and International Relations Area.
  5. Mark Mink & Jakob de Haan, 2005. "Has the Stability and Growth Pact Impeded Political Budget Cycles in the European Union?," CESifo Working Paper Series 1532, CESifo Group Munich.
  6. Feldstein, Martin, 2005. "The euro and the stability pact," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 421-426, June.
  7. Tilman Brück & Rudolf Zwiener, 2004. "Fiscal Policy Rules for Stabilisation and Growth: A Simulation Analysis of Deficit and Expenditure Targets in a Monetary Union," Discussion Papers of DIW Berlin 427, DIW Berlin, German Institute for Economic Research.
  8. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
  9. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer.
  10. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
  11. Mohr, Matthias, 2005. "A trend-cycle(-season) filter," Working Paper Series 0499, European Central Bank.
  12. Paolo Manasse, 2006. "Procyclical Fiscal Policy," IMF Working Papers 06/27, International Monetary Fund.
  13. Marco Buti & Paul van den Noord, 2003. "Discretionary Fiscal Policy and Elections: The Experience of the Early Years of EMU," OECD Economics Department Working Papers 351, OECD Publishing.
  14. Fabrizio Balassone & Maura Francese, 2004. "Cyclical asymmetry in fiscal policy, debt accumulation and the Treaty of Maastricht," Temi di discussione (Economic working papers) 531, Bank of Italy, Economic Research and International Relations Area.
  15. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  16. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  17. Marco Buti & Paul Noord, 2004. "Fiscal Discretion and Elections in the Early Years of EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 737-756, November.
  18. Mark Hallerberg & Rolf Strauch, 2002. "On the Cyclicality of Public Finances in Europe," Empirica, Springer, vol. 29(3), pages 183-207, September.
  19. Levi, Maurice D, 1973. "Errors in the Variables Bias in the Presence of Correctly Measured Variables," Econometrica, Econometric Society, vol. 41(5), pages 985-86, September.
  20. Martin Larch & Matteo Salto, 2003. "Fiscal rules, inertia and discretionary fiscal policy," European Economy - Economic Papers 194, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  21. Henning Bohn, 1998. "The Behavior Of U.S. Public Debt And Deficits," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 949-963, August.
  22. Darrel Cohen & Glenn Follette, 2003. "Forecasting exogenous fiscal variables in the United States," Finance and Economics Discussion Series 2003-59, Board of Governors of the Federal Reserve System (U.S.).
  23. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  24. Allan Drazen, 2001. "The Political Business Cycle After 25 Years," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 75-138 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. António Afonso & Peter Claeys & Ricardo M. Sousa, 2009. "Fiscal Regime Shifts in Portugal," Working Papers Department of Economics 2009/39, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  2. Jacopo Cimadomo, 2011. "Real-Time Data and Fiscal Policy Analysis: a Survey of the Literature," Working Papers 2011-20, CEPII research center.
  3. Candelon, Bertrand & Muysken, Joan & Vermeulen, Robert, 2007. "Fiscal Policy and Monetary Integration in Europe: An Update," Research Memorandum 050, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  4. Paloviita, Maritta, 2012. "Fiscal planning and implementation: euro area analysis based on real time data," Research Discussion Papers 34/2012, Bank of Finland.
  5. Bernoth, Kerstin & Hughes Hallett, Andrew & Lewis, John, 2008. "Did Fiscal Policy Makers Know What They Were Doing? Reassessing Fiscal Policy with Real Time Data," CEPR Discussion Papers 6758, C.E.P.R. Discussion Papers.
  6. Fabrizio Balassone & Daniele Franco & Stefania Zotteri, 2007. "The Reliability of EMU FIscal Indicators: Risks and Safeguards," Temi di discussione (Economic working papers) 633, Bank of Italy, Economic Research and International Relations Area.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_609_06. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.