The stability and growth pact, fiscal policy institutions and stabilization in Europe
Ever since its inception EMU has been subject to controversy. The fiscal policy rules embedded in the Treaty on European Union, and clarified in the Stability and Growth Pact (SGP), are probably the most contentious. The SGP as always being accused of being too rigid and of forcing procyclicality in fiscal policy. However, in an influential paper Galí and Perotti (2003) concluded that discretionary fiscal policy has actually become more countercyclical in EMU countries after the Maastricht Treaty. This paper concludes that this conclusion resists to several robustness tests using ex-post data, including the use of institutional variables, but not to the use of real-time data. Using ex-post data there is some evidence pointing to a more countercyclical use of discretionary fiscal policy (or at least to a decrease in the use of procyclical discretionary fiscal policy). However, the use of real-time data for the period 1999-2006 reveals that discretionary fiscal policy has been designed to be procyclical. Hence, the actual acyclical behaviour of discretionary fiscal policy in the period after 1999 seems to be simply the result of errors in the forecast of the output gap, and not the result of a change in the intentions of policy makers. As a result, there is no evidence in favour of the view that Maastricht rules have forced euro-area policy-makers to change their behaviour and design countercyclical discretionary fiscal policy.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 5 (2008)
Issue (Month): 1 (July)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/international+economics/journal/10368/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jordi Galí & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 533-572, October.
- Brender, Adi & Drazen, Allan, 2005.
"Political budget cycles in new versus established democracies,"
Journal of Monetary Economics,
Elsevier, vol. 52(7), pages 1271-1295, October.
- Adi Brender & Allan Drazen, 2004. "Political Budget Cycles in New versus Established Democracies," NBER Working Papers 10539, National Bureau of Economic Research, Inc.
- Athanasios Orphanides & Simon van Norden, 2002. "The Unreliability of Output-Gap Estimates in Real Time," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 569-583, November.
- Athanasios Orphanides & Simon van Norden, 1999. "The reliability of output gap estimates in real time," Finance and Economics Discussion Series 1999-38, Board of Governors of the Federal Reserve System (U.S.).
- Athanasios Orphanides & Simon Van_Norden, 2000. "The Reliability of Output Gap Estimates in Real Time," Econometric Society World Congress 2000 Contributed Papers 0768, Econometric Society.
- Athanasios Orphanides & Simon van Norden, 2001. "The Unreliability of Output Gap Estimates in Real Time," CIRANO Working Papers 2001s-57, CIRANO.
- Athanasios Orphanides & Simon van Norden, 1999. "The Reliability of Output Gap Estimates in Real Time," Macroeconomics 9907006, EconWPA.
- Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
- Volkerink, Bjorn & De Haan, Jakob, 2001. "Fragmented Government Effects on Fiscal Policy: New Evidence," Public Choice, Springer, vol. 109(3-4), pages 221-242, December.
- Carlos Fonseca Marinheiro, 2003. "Output Smoothing in EMU and OECD: Can We Forego Government Contribution? A Risk Sharing Approach," CESifo Working Paper Series 1051, CESifo Group Munich.
- Carlos Marinheiro, 2003. "Output Smoothing in EMU and OECD: Can We Forego Government Contribution? A risk sharing approach," GEMF Working Papers 2003-02, GEMF, Faculty of Economics, University of Coimbra.
- Alan J. Auerbach, 2002. "Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 109-150.
- Alan Auerbach, 2002. "Is There a Role for Discretionary Fiscal Policy?," NBER Working Papers 9306, National Bureau of Economic Research, Inc.
- Lars Jonung & Martin Larch, 2006. "Improving fiscal policy in the EU: the case for independent forecasts," Economic Policy, CEPR;CES;MSH, vol. 21(47), pages 491-534, 07.
- Lars Jonung & Martin Larch, 2004. "Improving fiscal policy in the EU: the case for independent forecasts," European Economy - Economic Papers 2008 - 2015 210, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Forni, Lorenzo & Momigliano, Sandro, 2004. "Cyclical sensitivity of fiscal policies based on real-time data," MPRA Paper 4315, University Library of Munich, Germany.
- Lorenzo Forni & Sandro Momigliano, 2004. "Cyclical sensitivity of fiscal policies based on real-time data," Temi di discussione (Economic working papers) 540, Bank of Italy, Economic Research and International Relations Area.
- Woo, Jaejoon, 2003. "Economic, political, and institutional determinants of public deficits," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 387-426, March.
- Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
- Galí, Jordi & Perotti, Roberto, 2003. "Fiscal Policy and Monetary Integration in Europe," CEPR Discussion Papers 3933, C.E.P.R. Discussion Papers.
- Bayoumi, Tamim & Masson, Paul R., 1995. "Fiscal flows in the United States and Canada: Lessons for monetary union in Europe," European Economic Review, Elsevier, vol. 39(2), pages 253-274, February.
- Bayoumi, Tamim & Masson, Paul R, 1994. "Fiscal Flows in the United States and Canada: Lessons for Monetary Union in Europe," CEPR Discussion Papers 1057, C.E.P.R. Discussion Papers.
- Lane, Philip R., 2003. "The cyclical behaviour of fiscal policy: evidence from the OECD," Journal of Public Economics, Elsevier, vol. 87(12), pages 2661-2675, December.
- Philip R. Lane, 2002. "The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD," Trinity Economics Papers 20022, Trinity College Dublin, Department of Economics.
- Jochen Mierau & Richard Jong-A-Pin & Jakob de Haan, 2007. "Do political variables affect fiscal policy adjustment decisions? New empirical evidence," Public Choice, Springer, vol. 133(3), pages 297-319, December.
- Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:kap:iecepo:v:5:y:2008:i:1:p:189-207. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.