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Ricardian fiscal regimes in the European Union

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  • Afonso, António

Abstract

The prevalence of either Ricardian or non-Ricardian fiscal regimes is important both for practical policy reasons and to assess fiscal sustainability, and this is of particular relevance for European Union countries. The purpose of this paper is to assess, with a panel data set, the empirical evidence concerning the existence of Ricardian fiscal regimes in EU-15 countries. The results give support to the Ricardian fiscal regime hypothesis throughout the sample period, and for sub-samples accounting for the dates of the Maastricht Treaty and for the setting-up of the Stability and Growth Pact. Additionally, electoral budget cycles also seem to play a role in fiscal behaviour. JEL Classification: C23, E62, H62

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Paper provided by European Central Bank in its series Working Paper Series with number 0558.

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Date of creation: Nov 2005
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Handle: RePEc:ecb:ecbwps:20050558

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Keywords: European Union; fiscal regimes; panel data models;

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