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Country-specific fiscal reaction functions: what lessons for EMU ?

Author

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  • Amélie BARBIER-GAUCHARD
  • Nicolas MAZUY

Abstract

This paper deals with heterogeneous fiscal behaviors of euro area countries. We estimate EMU Members States fiscal reaction function using time series approach covering the period 1990 :Q1-2017 :Q2. Among the major lessons from this analysis, three general and striking results are worth highlighting : (1) factors explaining national fiscal reaction function in the short run differ from those in the long run, (2) some explanatory variables seem common to all countries while others only concern a small number of countries and (3) the sign of the impact of these explanatory variables can also differ between the countries. Finally, this paper raises the implications of heterogeneous fiscal policies on the functioning of monetary union and asks the question of fiscal convergence in the euro area.

Suggested Citation

  • Amélie BARBIER-GAUCHARD & Nicolas MAZUY, 2018. "Country-specific fiscal reaction functions: what lessons for EMU ?," Working Papers of BETA 2018-28, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2018-28
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    File URL: http://beta.u-strasbg.fr/WP/2018/2018-28.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Iancu, Aurel & Olteanu, Dan Constantin, 2023. "Debt Limit, Fiscal Space and Fiscal Fatigue in the Central and Eastern European Countries of EU," Working Papers of National Institute for Economic Research 230629, Institutul National de Cercetari Economice (INCE).
    3. Attinasi, Maria Grazia & Palazzo, Alessandra Anna & Pierluigi, Beatrice, 2019. "Fiscal activism in the euro area and in other advanced economies: new evidence," Working Paper Series 2344, European Central Bank.

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    More about this item

    Keywords

    fiscal reaction functions; euro area; error correction model; heterogeneity.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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