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Fiscal behaviour in the European Union: rules, fiscal decentralization and government indebtedness

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  • Afonso, António
  • Hauptmeier, Sebastian

Abstract

We assess the fiscal behaviour in the European Union countries for the period 1990-2005 via the responsiveness of budget balances to several determinants. The results show that the existence of effective fiscal rules, the degree of public spending decentralization, and the electoral cycle can impinge on the country’s fiscal position. Furthermore, the results also support the responsiveness of primary balances to government indebtedness. JEL Classification: C23, E62, H62

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1054.

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Date of creation: May 2009
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Handle: RePEc:ecb:ecbwps:20091054

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Keywords: European Union; fiscal decentralization; fiscal regimes; fiscal rules; panel data;

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  1. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
  2. António Afonso, 2008. "Ricardian fiscal regimes in the European Union," Empirica, Springer, vol. 35(3), pages 313-334, July.
  3. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  4. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
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Cited by:
  1. Nerlich, Carolin & Reuter, Wolf Heinrich, 2013. "The design of national fiscal frameworks and their budgetary impact," Working Paper Series 1588, European Central Bank.
  2. Truong Nguyen, 2013. "Estimating India's Fiscal Reaction Function," ASARC Working Papers 2013-05, The Australian National University, Australia South Asia Research Centre.
  3. Hans Pitlik, 2010. "Fiscal Governance and Government Investment in Europe since the 1990s," WIFO Working Papers 370, WIFO.
  4. António Afonso & Ana Sofia Guimarães, 2014. "The relevance of fiscal rules for fiscal and yield developments," Working Papers Department of Economics 2014/05, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  5. Ioannou, Demosthenes & Stracca, Livio, 2011. "Have euro area and EU economic governance worked? Just the facts," Working Paper Series 1344, European Central Bank.
  6. Luc Eyraud & Marialuz Moreno Badia, 2013. "Too Small to Fail? Subnational Spending Pressures in Europe," IMF Working Papers 13/46, International Monetary Fund.
  7. Cerón, Juan A., 2012. "La respuesta de la política fiscal a la actividad económica en los países desarrollados/Fiscal policy reaction to economic activity in developed countries," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 369 (32 pag, Abril.
  8. Sacchi, Agnese & Salotti, Simone, 2014. "The asymmetric nature of fiscal decentralization: theory and practice," MPRA Paper 54506, University Library of Munich, Germany.
  9. Martin Plödt & Claire Reicher, 2014. "Primary surplus and debt projections based on estimated fiscal reaction functions for euro area countries," Kiel Working Papers 1900, Kiel Institute for the World Economy.
  10. Juan Antonio Cerón Cruz, 2011. "¿Qué preocupa a los gobiernos, la brecha de producción o el PIB?," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 12, pages 199-205.
  11. Athanasios Tagkalakis, 2012. "The effects of financial crisis on fiscal positions," Working Papers 145, Bank of Greece.
  12. Holm-Hadulla, Fédéric & Hauptmeier, Sebastian & Rother, Philipp, 2010. "The impact of numerical expenditure rules on budgetary discipline over the cycle," Working Paper Series 1169, European Central Bank.
  13. Martin Plödt & Claire Reicher, 2014. "Estimating simple fiscal policy reaction functions for the euro area countries," Kiel Working Papers 1899, Kiel Institute for the World Economy.

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