Advanced Search
MyIDEAS: Login

The Causes of Excessive Deficits in the European Union

Contents:

Author Info

Abstract

Several studies have identified the factors that cause public deficits in industrial democracies. They consider that economic, political and institutional factors play an important role in the understanding of those deficits. However, the study of the determinants of excessive deficits remains practically unexplored. Since excessive deficits can have large negative spillover effects when countries are forming a monetary union without a centralised budget – as it is the case for a group of European countries – this paper tries to explore that gap in the literature by identifying the main causes of excessive deficits and the ways of avoiding them. Binary choice models are estimated over a panel of 15 European Union countries for the period 1970-2006, where an excessive deficit is defined as a deficit higher than 3% of GDP. Results show that a weak fiscal stance, low economic growth, the timing of parliamentary elections and majority left-wing governments are the main causes of excessive deficits in the EU countries. Moreover, the institutional constraints imposed after Maastricht over the EU countries’ fiscal policy have succeeded in reducing the probability of excessive deficits in Europe, especially in small countries. Therefore, this study concludes that supranational fiscal constraints, national efforts to reduce public debts, growth promoting policies and mechanisms to avoid political opportunism and partisan effects are essential factors for an EU country to avoid excessive deficits. Finally, the results presented in this paper raise the idea that a good strategy for the EU countries to avoid excessive deficits caused by the opportunistic behaviour of their policymakers would be to schedule elections for the beginning or the end of the year.

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://www3.eeg.uminho.pt/economia/nipe/docs/2007/NIPE_WP_13_2007.PDF
Download Restriction: no

Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 13/2007.

as in new window
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:nip:nipewp:13/2007

Contact details of provider:
Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
Phone: +351-253604510 ext 5532
Fax: +351-253601380
Email:
Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Excessive public deficits; European Union; Political opportunism; Binary choice models;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

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

Cited by:
  1. Luca Agnello & Vitor Castro & Ricardo M. Sousa, 2013. "Are There Change-Points in the Likelihood of a Fiscal Consolidation Ending?," GEMF Working Papers 2013-06, GEMF - Faculdade de Economia, Universidade de Coimbra.
  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.
  3. L, Agnello. & R, M. Sousa., 2012. "How does Fiscal Consolidation Impact on Income Inequality?," Working papers 382, Banque de France.
  4. Eugenia-Ramona Mara, 2012. "Determinants of fiscal budget volatility in old versus new EU member states," Working Papers Department of Economics 2012/31, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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:nip:nipewp:13/2007. 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: (Maria João Thompson).

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.