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Duration of Fiscal Budgetary Consolidations in the European Union

  • Reyes Maroto Illera
  • Carlos Mulas-Granados

This paper examines the duration of fiscal consolidations among the fifteen EU Members States using data from the European Commission for the period 1960-2000. Using the duration model approach, we estimate the hazard and survivor functions of our series. Then we discuss what is the duration model that best fits our data, and which are the explanatory variables that best exp lain the probability of ending a fiscal consolidation period. We also deal with those aspects related to sample heterogeneity and the sensitivity of the results to different possible definitions of fiscal adjustment. We find evidence that the probability of ending a period of fiscal consolidation depends on the debt level, the magnitude of the adjustment, the extent of expenditure cuts, and the degree of cabinet fragmentation. We also find that under a stricter definition of fiscal consolidation, political variables, such as coalition size and election year, gain importance with respect to economic variables as predictors of the probability of ending a fiscal consolidation period.

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Paper provided by European Economy Group in its series European Economy Group Working Papers with number 18.

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Length: 31 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:eeg:euroeg:18
Contact details of provider: Postal: Despacho 104.Pabelloon de Segundo, Facultad de Economicas. Universidad Complutense de Madrid. 28223 Pozuelo de Alarcon, Madrid
Phone: 0034913942454
Fax: 0034913942457
Web page: http://www.ucm.es/info/econeuro
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  1. Alesina, Alberto F & Cohen, Gerald D & Roubini, Nouriel, 1992. "Macroeconomic Policy and Elections in OECD Democracies," CEPR Discussion Papers 608, C.E.P.R. Discussion Papers.
  2. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-64, August.
  3. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
  4. Alberto Alesina & Roberto Perotti & José Tavares, 1998. "The Political Economy of Fiscal Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 197-266.
  5. Robert F. Westcott & C. John McDermott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Working Papers 96/59, International Monetary Fund.
  6. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
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