Discretionary Fiscal Policy in the EMU Context: An empirical approach (1981-2010)
The paper attempts to investigate how the Maastricht criteria and the Stability and Growth Pact have impaired the capacity of EZ national authorities to conduct discretionary fiscal policy. We estimate fiscal determinants for the structural public deficit over the period of 1981-2010, estimating panel data equations in order to increase the strength of the test by enhancing the time series dimension of the data by the cross section. We argue that the degree of the countrecyclicality of discretionary fiscal policy has been reduced significantly after the Maastricht Treaty. Also, the empirical evidence shows that national fiscal rules have a significant positive impact in budgetary outcomes.
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