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Fiscal Policies and Business Cycles in an Enlarged Euro Area

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  • Karsten Staehr

Abstract

This paper compares the cyclical properties of fiscal policies across the 12 original eurozone countries and the future members from Central and Eastern Europe. For the sample period 1995-2005, the fiscal balance exhibits less inertia and is more counter-cyclical in Central and Eastern European countries than in members of the eurozone. The main differences arise from the revenue side. Differences in the formation of fiscal policy between current and future eurozone countries decrease over time. Autonomous fiscal policy has little or no effect on cyclical variability in either of the two groups of countries. Counter-cyclical fiscal policy appears to be effective in Central and Eastern European countries, but largely ineffective in eurozone countries.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1933.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1933

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Keywords: fiscal policy determinants; fiscal policy effects; eurozone expansion;

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Citations

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Cited by:
  1. Karsten Staehr, 2010. "The global financial crisis and public finances in the New EU Countries from Central and Eastern Europe," Bank of Estonia Working Papers wp2010-02, Bank of Estonia, revised 04 Feb 2010.
  2. Juan Carlos Cuestas & Karsten Steahr, 2011. "Fiscal shocks and budget balance persistence in the EU countries from Central and Eastern Europe," Working Papers 2011014, The University of Sheffield, Department of Economics, revised May 2011.
  3. Paloviita, Maritta, 2012. "Fiscal planning and implementation: euro area analysis based on real time data," Research Discussion Papers 34/2012, Bank of Finland.
  4. Paloviita, Maritta, 2012. "Real time uncertainty in fiscal planning and debt accumulation in the euro area," Research Discussion Papers 35/2012, Bank of Finland.
  5. Karsten Staehr, 2008. "The Maastricht Inflation Criterion and the New EU Members from Central and Eastern Europe," Bank of Estonia Working Papers 2008-04, Bank of Estonia, revised 30 Oct 2008.
  6. Ayala, Astrid & Blazsek, Szabolcs, 2013. "Structural breaks in public finances in Central and Eastern European countries," Economic Systems, Elsevier, vol. 37(1), pages 45-60.
  7. John Lewis, 2013. "Fiscal policy in Central and Eastern Europe with real time data: cyclicality, inertia and the role of EU accession," Applied Economics, Taylor & Francis Journals, vol. 45(23), pages 3347-3359, August.
  8. Orlando Gomes, 2009. "On the stability of endogenous growth models: An evaluation of the agents' response to output fluctuations," Journal of Economic Studies, Emerald Group Publishing, vol. 36(1), pages 17-35, January.
  9. Guido Baldi & Karsten Staehr, 2013. "The European Debt Crisis and Fiscal Reaction Functions in Europe 2000-2012," Discussion Papers of DIW Berlin 1295, DIW Berlin, German Institute for Economic Research.
  10. Mikek, Peter, 2008. "Alternative monetary policies and fiscal regime in new EU members," Economic Systems, Elsevier, vol. 32(4), pages 335-353, December.

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