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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
12647.
Find related papers by JEL classification: F15 - International Economics - - Trade - - - Economic Integration H00 - Public Economics - - General - - - General H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
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