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Have euro area and EU economic governance worked? Just the facts

  • Ioannou, Demosthenes
  • Stracca, Livio

We test whether two key elements of the EU and euro area economic governance framework, the Stability and Growth Pact and the Lisbon Strategy, have had any impact on macroeconomic outcomes. We test this proposition using a difference-in-difference approach on a panel of over 30 countries, some of which are non-EU (control group). Hence, the impact of the EU economic governance pillars is evaluated based on both the performance before and after their application as well as against the control group. We find strong and robust evidence that neither the Stability and Growth Pact nor the Lisbon Strategy have had a significant beneficial impact on fiscal and economic performance outcomes. We conclude that a profound reform of these pillars is needed to make them work in the next decade. JEL Classification: E62, E63, H63, O43

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Paper provided by European Central Bank in its series Working Paper Series with number 1344.

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Date of creation: May 2011
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Handle: RePEc:ecb:ecbwps:20111344
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  1. Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, vol. 69(3), pages 305-321, September.
  2. repec:ner:tilbur:urn:nbn:nl:ui:12-3125517 is not listed on IDEAS
  3. Buiter, Willem H., 2005. "The 'Sense and Nonsense of Maastricht' Revisited: What Have We Learnt About Stabilization In EMU?," CEPR Discussion Papers 5405, C.E.P.R. Discussion Papers.
  4. Beetsma, Roel & Giuliodori, Massimo & Wierts, Peter, 2009. "Budgeting versus implementing fiscal policy in the EU," CEPR Discussion Papers 7285, C.E.P.R. Discussion Papers.
  5. Cândida Ferreira, 2009. "Fiscal Behaviour in the European Union: Rules, Fiscal Decentralization and Government Indebtedness," Working Papers Department of Economics 2009/23, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  6. Levent Bulut, 2012. "Market Disciplining Of The Developing Countries' Sovereign Governments," Contemporary Economic Policy, Western Economic Association International, vol. 30(4), pages 463-488, October.
  7. Alberto Alesina & Silvia Ardagna & Vincenzo Galasso, 2011. "The Euro and Structural Reforms," Review of Economics and Institutions, Università di Perugia, vol. 2(1).
  8. Micael Castanheira De Moura & Tito Boeri & Ricardo Faini & Vincenzo Galasso, 2006. "Structural reforms without prejudice," ULB Institutional Repository 2013/10017, ULB -- Universite Libre de Bruxelles.
  9. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, December.
  10. Bernoth, Kerstin & Hughes Hallett, Andrew & Lewis, John, 2008. "Did Fiscal Policy Makers Know What They Were Doing? Reassessing Fiscal Policy with Real Time Data," CEPR Discussion Papers 6758, C.E.P.R. Discussion Papers.
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