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Are European fiscal rules that bad? Discretionary fiscal policies in New Member States

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  • Bettina Fincke

    () (Bielefeld University)

  • Marcin Wolski

    () (European Investment Bank)

Abstract

Abstract There is no clear-cut evidence on how the adoption of the European fiscal standards influences discretionary fiscal policies within the Member States. This study investigates that phenomenon on the example of the 2004 enlargement. The results show that the effects of the adoption of EU fiscal rules bring a statistically significant change toward more counter-cyclical behavior. The results are robust for different model specifications, including alternative time spans and correcting for the possible influence of the financial crises and political forces. Interestingly, the year 2004 did not have any significant impact on the change in fiscal policies in the Old Member States, suggesting that the EU entry might motivate new members to run more prudent budgetary policies.

Suggested Citation

  • Bettina Fincke & Marcin Wolski, 2016. "Are European fiscal rules that bad? Discretionary fiscal policies in New Member States," Empirical Economics, Springer, vol. 51(2), pages 517-546, September.
  • Handle: RePEc:spr:empeco:v:51:y:2016:i:2:d:10.1007_s00181-015-1006-z
    DOI: 10.1007/s00181-015-1006-z
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    References listed on IDEAS

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    Cited by:

    1. Ricci-Risquete, Alejandro & Ramajo, Julián & de Castro, Francisco, 2016. "Do Spanish fiscal regimes follow the euro-area trends? Evidence from Markov-Switching fiscal rules," Economic Modelling, Elsevier, vol. 59(C), pages 484-494.
    2. repec:liu:liucej:v:14:y:2017:i:2:p:161-175 is not listed on IDEAS
    3. repec:liu:liucej:v:14:y:2017:i:2:p:157-160 is not listed on IDEAS

    More about this item

    Keywords

    Discretionary fiscal policy; New Member States; Counter-cyclical policies; Fiscal rules;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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