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Cyclical Asymmetry in Fiscal Policy, Debt Accumulation and the Treaty of Maastricht

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  • Fabrizio BALASSONE
  • Maura FRANCESE

Abstract

In this paper we present a stylised framework of fiscal policy determination that considers both structural targets and cyclical factors. Applying this framework to a sample of 16 OECD countries, we find evidence of significant asymmetry in the reaction of fiscal policy to positive and negative cyclical conditions, with budgetary balances deteriorating in contractions and not improving in expansions. This asymmetry appears to have contributed significantly to debt accumulation. We find no evidence that EU fiscal rules have reduced the ability of governments to conduct stabilisation policy between 1992 and 2000.
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Suggested Citation

  • Fabrizio BALASSONE & Maura FRANCESE, 2010. "Cyclical Asymmetry in Fiscal Policy, Debt Accumulation and the Treaty of Maastricht," EcoMod2004 330600014, EcoMod.
  • Handle: RePEc:ekd:003306:330600014
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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