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The Impact of Fiscal Rules on Public Finances: Theory and Empirical Evidence for the Euro Area

Author

Listed:
  • Wim Marneffe
  • Bas Van Aarle
  • Wouter Van Der Wielen
  • Lode Vereeck

Abstract

This paper presents a review of the most significant fiscal rules policymakers can choose from. The insights from this review are then applied to the current budgetary situation of the European Union. In the European Union, the supranational Stability and Growth Pact (SGP) should provide the necessary guidance in limiting governmental borrowing by member states. In addition to the SGP, European countries are implementing various other fiscal rules that bind central, regional and local governments. We provide empirical estimates of the effect of fiscal rules on fiscal balance, government spending and government revenues, using a Fiscal Rule Index. We find that fiscal rules have some effect on fiscal balances.

Suggested Citation

  • Wim Marneffe & Bas Van Aarle & Wouter Van Der Wielen & Lode Vereeck, 2010. "The Impact of Fiscal Rules on Public Finances: Theory and Empirical Evidence for the Euro Area," CESifo Working Paper Series 3303, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3303
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3303.pdf
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    1. repec:eee:poleco:v:51:y:2018:i:c:p:69-92 is not listed on IDEAS
    2. repec:ksa:szemle:1732 is not listed on IDEAS
    3. repec:kap:pubcho:v:178:y:2019:i:1:d:10.1007_s11127-018-0605-6 is not listed on IDEAS
    4. Heinemann, Friedrich & Moessinger, Marc-Daniel & Yeter, Mustafa, 2018. "Do fiscal rules constrain fiscal policy? A meta-regression-analysis," European Journal of Political Economy, Elsevier, vol. 51(C), pages 69-92.
    5. Balatoni, András & Tóth G., Csaba, 2012. "Az új magyar adósságszabály értékelése
      [Assessment of the new regulations on debt]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1107-1137.
    6. Tóth, Csaba G., 2017. "Own or inherited? The effect of national fiscal rules after changes of government," MPRA Paper 81178, University Library of Munich, Germany.
    7. Ademmer, Esther & Dreher, Ferdinand, 2014. "Institutional constraints to political budget cycles in the enlarged EU," Kiel Working Papers 1964, Kiel Institute for the World Economy (IfW).

    More about this item

    Keywords

    euro area; fiscal policy; policy rules; fiscal sustainability;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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