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Fiscal Restraint and the Political Economy of EMU

  • Rotte, Ralph
  • Zimmermann, Klaus F

While the principle of delegation has become well established on the national level for monetary policy, fiscal policies remain in the hands of policymakers depending on rent-seeking interest groups. The authors argue that the Maastricht Treaty provides a unique international commitment that enables governments to follow restrictive fiscal policies by attributing their negative side effects to Europe and to implement austerity measures despite rising unemployment or a decline in growth. Hence, the popularity of the European idea is instrumented to enforce fiscal discipline. The paper outlines the political economy framework and presents new econometric evidence. Copyright 1998 by Kluwer Academic Publishers

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Article provided by Springer in its journal Public Choice.

Volume (Year): 94 (1998)
Issue (Month): 3-4 (March)
Pages: 385-406

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Handle: RePEc:kap:pubcho:v:94:y:1998:i:3-4:p:385-406
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  1. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  2. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  3. Frey, Bruno S. & Eichenberger, Reiner, 1994. "The political economy of stabilization programmes in developing countries," European Journal of Political Economy, Elsevier, vol. 10(1), pages 169-190, May.
  4. 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.
  5. Crafts, Nicholas & Toniolo, Gianni, 1995. "Post-war Growth: An Overview," CEPR Discussion Papers 1095, C.E.P.R. Discussion Papers.
  6. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  7. Vaubel, Roland, 1994. " The Political Economy of Centralization and the European Community," Public Choice, Springer, vol. 81(1-2), pages 151-90, October.
  8. Eichengreen, Barry & Bayoumi, Tamim, 1994. "The political economy of fiscal restrictions: Implications for Europe from the United States," European Economic Review, Elsevier, vol. 38(3-4), pages 783-791, April.
  9. Veall, Michael R & Zimmermann, Klaus F, 1996. " Pseudo-R-[superscript 2] Measures for Some Common Limited Dependent Variable Models," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 241-59, September.
  10. Vaubel, Roland, 1994. "The public choice analysis of European integration: A survey," European Journal of Political Economy, Elsevier, vol. 10(1), pages 227-249, May.
  11. Alan J. Auerbach, 1994. "The U.S. Fiscal Problem: Where We Are, How We Got Here and Where We're Going," NBER Working Papers 4709, National Bureau of Economic Research, Inc.
  12. Mancur Olson, 1984. "Microeconomic incentives and macroeconomic decline," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 120(4), pages 631-645, December.
  13. Olson, Mancur, Jr, 1995. "The Devolution of the Nordic and Teutonic Economies," American Economic Review, American Economic Association, vol. 85(2), pages 22-27, May.
  14. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  15. Eichenberg, Richard C. & Dalton, Russell J., 1993. "Europeans and the European Community: the dynamics of public support for European integration," International Organization, Cambridge University Press, vol. 47(04), pages 507-534, September.
  16. Tollison, Robert D, 1982. "Rent Seeking: A Survey," Kyklos, Wiley Blackwell, vol. 35(4), pages 575-602.
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