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Does Eurozone Membership Strengthen the Significance of Fiscal Instruments?

Author

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  • Slawomir Franek

    (Institute of Finance, University of Szczecin)

  • Marta Postula

    (Faculty of Management, University of Warsaw)

Abstract

This paper investigates the relationship between fiscal instruments (such as numerical fiscal rules, independent fiscal institutions and medium-term budgetary frameworks) and fiscal performance of EU countries. An empirical analysis using panel data estimation method reveals a statistically significant and positive impact of the use of fiscal instruments on the fiscal stance. The results obtained warrant the conclusion that the use of multiannual budgetary framework has the strongest (among all fiscal instruments) impact on the budget balance. In addition, there is no clear evidence that an EU country's eurozone membership guarantees better fiscal performance and stronger fiscal instruments. This conclusion also proves justified upon excluding the impact of fiscal reform implemented in those EU member states that joined the eurozone in the period under analysis.

Suggested Citation

  • Slawomir Franek & Marta Postula, 2020. "Does Eurozone Membership Strengthen the Significance of Fiscal Instruments?," Annals of Economics and Finance, Society for AEF, vol. 21(1), pages 131-151, May.
    • Handle: RePEc:cuf:journl:y:2020:v:21:i:1:franekpostula
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal policy; Eurozone; Budgetary frameworks;
    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
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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