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Euro membership and fiscal reaction functions

Listed author(s):
  • Alfons Weichenrieder

    ()

  • Jochen Zimmer

The paper uses fiscal reaction functions for a panel of euro-area countries. We investigate whether euro membership has reduced the responsiveness to shocks in the level of inherited debt. Compared with the performance in the period between signing of the Maastricht Treaty and introduction of the euro, membership has significantly reduced the average responsiveness. Conversely, when compared to the period before the Maastricht Treaty, euro membership is associated with a larger responsiveness. The results are sensitive to changes in the specification, such as an exclusion of Greece from the panel. Copyright Springer Science+Business Media New York 2014

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File URL: http://hdl.handle.net/10.1007/s10797-013-9299-3
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Article provided by Springer & International Institute of Public Finance in its journal International Tax and Public Finance.

Volume (Year): 21 (2014)
Issue (Month): 4 (August)
Pages: 598-613

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Handle: RePEc:kap:itaxpf:v:21:y:2014:i:4:p:598-613
DOI: 10.1007/s10797-013-9299-3
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  1. Mendoza, Enrique G. & Ostry, Jonathan D., 2008. "International evidence on fiscal solvency: Is fiscal policy "responsible"?," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1081-1093, September.
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  7. Hamilton, James D & Flavin, Marjorie A, 1986. "On the Limitations of Government Borrowing: A Framework for EmpiricalTesting," American Economic Review, American Economic Association, vol. 76(4), pages 808-819, September.
  8. Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-445, July.
  9. Haug, Alfred A, 1991. "Cointegration and Government Borrowing Constraints: Evidence for the United States," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(1), pages 97-101, January.
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