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Empirical Evidencies for the Budget Deficits Co-Integration in the Old European Union Members: Are there any Interlinkages in Fiscal Policies?

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  • Talpos, Ioan
  • Dima, Bogdan
  • Mutascu, Mihai
  • Enache, Cosmin

Abstract

In the last years, the fiscal harmonization among the European Union members has become a pillar of economic integration and of fiscal and financial stability in the European area. The institutional changes, the semi-failure of the “old” Stability and Growth Pact as well as the recent waves of enlargements all these were put a greater emphasis on this issue inducing a higher pressure for fiscal discipline. In this context, the objective of the paper is to examines recent empirical evidences for bilateral and multilateral integration between fiscal policies, as this are synthesised by budget deficits, of old European Union members in the framework of the Johansen co-integration procedure with a preliminary appliance of the principal component analysis. The study finds that the dynamic of European fiscal policies takes place under the impact of some common driving forces which leads to a differentiate behaviour of two sub regional-groups individualized by the budget deficit series evolutionary patterns. Overall, it concludes that there could be find empirical evidences to support the thesis that a process of fiscal integration is currently running at least at the level of old European Union countries.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12647.

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Date of creation: 09 Jan 2009
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Handle: RePEc:pra:mprapa:12647

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Keywords: Fiscal policies in E.U.; budget deficits; co-integration; Johansen Test;

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  1. Anindya Banerjee & Josep Lluís Carrion-i-Silvestre, 2006. "Cointegration in Panel Data with Breaks and Cross-Section Dependence," Economics Working Papers ECO2006/5, European University Institute.
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  7. Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc.
  8. Silika Prohl & Friedrich G. Schneider, 2006. "Sustainability of Public Debt and Budget Deficit: Panel cointegration analysis for the European Union Member countries," Economics working papers 2006-10, Department of Economics, Johannes Kepler University Linz, Austria.
  9. W. R. M. Perraudin & Thierry Pujol, 1990. "European Fiscal Harmonization and the French Economy," IMF Working Papers 90/96, International Monetary Fund.
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Cited by:
  1. Ioan Talpos & Alexandru Avram, 2013. "The Pro And Cons Of The New Treaty On Stability, Coordination And Governance In The Economic And Monetary Union," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 948-957, July.

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