New Evidence on the Effectiveness of Europe's Fiscal Restrictions
This paper investigates the past effectiveness of the Maastricht Treaty (MT) and Stability and Growth Pact (SGP) in disciplining fiscal policy in the Euro zone. We estimate fiscal reaction functions for a panel of 11 members of the Euro zone including the more recent period of the reformed SGP, and compare them with fiscal responses from other “industrialized” OECD countries. Our main finding is that in contrast with the MT, the SGP has been ineffective in tackling excessive deficits in the Euro zone. Moreover, it has also not induced a countercyclical behavior of the fiscal authorities in the region. These results evince the need for reforms in Europe’s fiscal restrictions in order to restore their credibility.
|Date of creation:||Jul 2009|
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- Beetsma, Roel & Ribeiro, Marcos Poplawski & Schabert, Andreas, 2008. "A Comparison of Debt and Primary-deficit Constraints," CEPR Discussion Papers 6897, C.E.P.R. Discussion Papers.
- Antonio Fatás & Ilian Mihov, 2010.
"The Euro and Fiscal Policy,"
in: Europe and the Euro, pages 287-324
National Bureau of Economic Research, Inc.
- Agnès Bénassy-Quéré & Marcos Poplawski Ribeiro, 2009. "Bad Weather for the Stability and Growth Pact," La Lettre du CEPII, CEPII research center, issue 286.
- Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
- Jean Pisani-Ferry, 2005. "Fiscal policy in EMU: towards a sustainability and growth pact," Working Papers 52, Bruegel.
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