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Short-term monitoring of fiscal policy discipline


  • Gonzalo Camba-Mendez

    (Directorate of Research, European Central Bank, Frankfurt am Main, Germany)

  • Ana Lamo

    (Directorate of Research, European Central Bank, Frankfurt am Main, Germany)


Under the Maastricht Treaty and the Stability and Growth Pact (SGP), European Union (EU) Member States commit themselves to avoid excessive deficits over 3% of GDP and to pursue the medium-term objective of budgetary positions close to balance or in surplus. The SGP also provides regulation for the surveillance of budgetary positions. An analysis of tools for the surveillance of budgetary positions is the focus of this paper. In particular, it addresses two open issues in the empirical public finance literature which are crucial for monitoring fiscal policy discipline in the EU. First, the estimation of the structural component of the fiscal balance ratio. Second, the computation, when only annual fiscal data are available, of quarterly budget balance ratios, using relevant information from quarterly measured macroeconomic series. An econometric model that addresses both issues is presented and estimated. Additionally, this modelling framework allows us to answer questions such as: what is the safety margin that will prevent a particular country from reaching, with certain probability, a budget deficit that breaches the 3% upper bound? Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Gonzalo Camba-Mendez & Ana Lamo, 2004. "Short-term monitoring of fiscal policy discipline," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 247-265.
  • Handle: RePEc:jae:japmet:v:19:y:2004:i:2:p:247-265
    DOI: 10.1002/jae.728

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    References listed on IDEAS

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    Cited by:

    1. de Groot, Oliver & Holm-Hadulla, Fédéric & Leiner-Killinger, Nadine, 2015. "Cost of borrowing shocks and fiscal adjustment," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 23-48.
    2. Onorante, Luca & Pedregal, Diego J. & Pérez, Javier J. & Signorini, Sara, 2010. "The usefulness of infra-annual government cash budgetary data for fiscal forecasting in the euro area," Journal of Policy Modeling, Elsevier, vol. 32(1), pages 98-119, January.
    3. MOULIN, Laurent & SALTO, Matteo & SILVESTRINI, Andrea & VEREDAS, David, 2004. "Using intra annual information to forecast the annual state deficits : the case of France," CORE Discussion Papers 2004048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Andrea Silvestrini & Matteo Salto & Laurent Moulin & David Veredas, 2008. "Monitoring and forecasting annual public deficit every month: the case of France," Empirical Economics, Springer, vol. 34(3), pages 493-524, June.
    5. Pérez, Javier J., 2005. "Early-warning tools to forecast general government deficit in the euro area: the role of intra-annual fiscal indicators," Working Paper Series 497, European Central Bank.
    6. Pedregal, Diego J. & Pérez, Javier J., 2010. "Should quarterly government finance statistics be used for fiscal surveillance in Europe?," International Journal of Forecasting, Elsevier, vol. 26(4), pages 794-807, October.
    7. Teresa Leal & Javier J. Pérez, 2004. "Monitorización de objetivos fiscales anuales: una aplicación con datos regionales," Economic Working Papers at Centro de Estudios Andaluces E2004/66, Centro de Estudios Andaluces.
    8. repec:wly:japmet:v:31:y:2016:i:7:p:1276-1290 is not listed on IDEAS
    9. Paulo Soares Esteves & Cláudia Braz, 2013. "Short-term forecasting of indirect tax revenues: an application for Portugal," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
    10. Arjocu Ana-Maria & Dronca Alexandru, 2015. "Measuring The Structural Budget Deficit In The European Union," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 147-153, February.
    11. Perez, Javier J., 2007. "Leading indicators for euro area government deficits," International Journal of Forecasting, Elsevier, vol. 23(2), pages 259-275.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus


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