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Fiscal Restraint and the Political Economy of EMU

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  • Rotte, Ralph
  • Zimmermann, Klaus F

Abstract

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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  • Rotte, Ralph & Zimmermann, Klaus F, 1998. "Fiscal Restraint and the Political Economy of EMU," Public Choice, Springer, vol. 94(3-4), pages 385-406, March.
    • Handle: RePEc:kap:pubcho:v:94:y:1998:i:3-4:p:385-406
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    Cited by:

    1. Dolls, Mathias & Peichl, Andreas & Zimmermann, Klaus F., 2011. "A Challenge for the G20: Globally Stipulated Debt Brakes and Transnational Independent Fiscal Supervisory Councils," IZA Discussion Papers 6160, Institute of Labor Economics (IZA).
    2. Tudor Mugurel AURSULESEI & Ștefan Cătălin TOPLICEANU & Liviu-George MAHA, 2020. "The relationship between the European Union's economic power status and the economic convergence of the Member States," Eastern European Journal for Regional Studies (EEJRS), Center for Studies in European Integration (CSEI), Academy of Economic Studies of Moldova (ASEM), vol. 6(1), pages 24-43, June.
    3. Thushyanthan Baskaran, 2009. "Did the Maastricht treaty matter for macroeconomic performance? A difference‐in‐difference investigation," Kyklos, Wiley Blackwell, vol. 62(3), pages 331-358, August.
    4. Dolls, Mathias & Peichl, Andreas & Zimmermann, Klaus F., 2011. "Eine Herausforderung für die G20: Global vereinbarte Schuldenbremsen und transnationale fiskalpolitische Aufsichtsgremien," IZA Standpunkte 45, Institute of Labor Economics (IZA).
    5. Paweł Gajewski, 2011. "Doświadczenia z reform fiskalnych w okresie tworzenia Unii Gospodarczej i Walutowej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1-2, pages 43-62.
    6. Baskaran, Thushyanthan, 2009. "Did the Maastricht treaty matter for macroeconomic performance?," MPRA Paper 30106, University Library of Munich, Germany.
    7. Blavoukos, Spyros & Pagoulatos, George, 2008. "Fiscal adjustment in Southern Europe: the limits of EMU conditionality," LSE Research Online Documents on Economics 5607, London School of Economics and Political Science, LSE Library.
    8. Oliver Pamp, 2008. "Partisan Preferences and Political Institutions: Explaining Fiscal Retrenchment in the European Union," European Political Economy Review, European Political Economy Infrastructure Consortium, vol. 8(Spring), pages 4-39.
    9. Markus Freitag & Pascal Sciarini, 2001. "The Political Economy of Budget Deficits in the European Union," European Union Politics, , vol. 2(2), pages 163-189, June.
    10. Spyros Blavoukos & George Pagoulatos, 2008. "Fiscal Adjustment in Southern Europe: the Limits of EMU Conditionality," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 12, Hellenic Observatory, LSE.

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