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Fiscal Cyclicality and EMU

Author

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  • Agustín S. Bénétrix

    () (IIIS, Trinity College Dublin)

  • Philip R. Lane

    () (IIIS, Trinity College Dublin and CEPR)

Abstract

For the set of EMU member countries, we examine cyclical patterns in fiscal outcomes. We find that there is significant time variation in fiscal cyclicality, with an improvement in the wake of the Maastricht Treaty but a deterioration after the creation of EMU. Furthermore, we show that the fiscal cycle is affected by the financial cycle in addition to the output cycle. The lessons for the current reforms of European economic and fiscal governance are manifest.

Suggested Citation

  • Agustín S. Bénétrix & Philip R. Lane, 2012. "Fiscal Cyclicality and EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp403, IIIS.
  • Handle: RePEc:iis:dispap:iiisdp403
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    1. repec:kap:openec:v:29:y:2018:i:1:d:10.1007_s11079-017-9446-z is not listed on IDEAS
    2. Plödt, Martin & Reicher, Claire A., 2015. "Estimating fiscal policy reaction functions: The role of model specification," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 113-128.
    3. Pasquale Foresti, 2015. "Monetary and debt-concerned fiscal policies interaction in monetary unions," International Economics and Economic Policy, Springer, vol. 12(4), pages 541-552, October.
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    6. Karlis Vilerts & Olegs Tkacevs, 2016. "The Impact of Sovereign Bond Yields on Fiscal Discipline," Working Papers 2016/05, Latvijas Banka.
    7. Burak Saltoðlu & Devrim Yýlmaz, 2013. "Why is it so Difficult and Complex to Solve the Euro Problem?," Working Papers 2013/02, Bogazici University, Department of Economics.
    8. repec:eee:ecmode:v:65:y:2017:i:c:p:138-146 is not listed on IDEAS
    9. Philip R. Lane, 2015. "International Financial Flows in Low-Income Countries," Pacific Economic Review, Wiley Blackwell, vol. 20(1), pages 49-72, February.
    10. Benedetta Bianchi, 2016. "Sovereign Risk Premia and the International Balance Sheet: Lessons from the European Crisis," Open Economies Review, Springer, vol. 27(3), pages 471-493, July.
    11. repec:spr:empeco:v:54:y:2018:i:2:d:10.1007_s00181-016-1215-0 is not listed on IDEAS
    12. Chortareas, Georgios & Mavrodimitrakis, Christos, 2016. "Can monetary policy fully stabilize pure demand shocks in a monetary union with a fiscal leader?," Economic Modelling, Elsevier, vol. 54(C), pages 463-468.
    13. Philip R. Lane, 2012. "The European Sovereign Debt Crisis," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 49-68, Summer.
    14. Liu, Kai & Poplawski-Ribeiro, Marcos, 2015. "Short- and Long-Run Fiscal Elasticities: International Evidence," MPRA Paper 65950, University Library of Munich, Germany.
    15. Reicher, Claire, 2014. "A set of estimated fiscal rules for a cross-section of countries: Stabilization and consolidation through which instruments?," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 184-198.
    16. R. Golinelli & I. Mammi & A. Musolesi, 2018. "Parameter heterogeneity, persistence and cross-sectional dependence: new insights on fiscal policy reaction functions for the Euro area," Working Papers wp1120, Dipartimento Scienze Economiche, Universita' di Bologna.
    17. Philip Lane, 2010. "Some Lessons for Fiscal Policy from the Financial Crisis," The Institute for International Integration Studies Discussion Paper Series iiisdp334, IIIS.
    18. Arora, Sanchit & Reicher, Claire, 2014. "Changes in the Response of Fiscal Policy to Monetary Policy in the EMU," Kiel Advanced Studies Working Papers 465, Kiel Institute for the World Economy (IfW).
    19. Ferdinandusse, Marien & Checherita-Westphal, Cristina & Attinasi, Maria Grazia & Bańkowski, Krzysztof & Palaiodimos, Georgios & Trindade Campos, Maria Manuel, 2017. "Euro area fiscal stance," Occasional Paper Series 182, European Central Bank.
    20. Philip Lane, 2010. "External Imbalances and Fiscal Policy," The Institute for International Integration Studies Discussion Paper Series iiisdp314, IIIS.
    21. repec:ebl:ecbull:eb-17-00229 is not listed on IDEAS
    22. Jakob de Haan & Niels D. Gilbert & Jeroen Hessel & Silvie Verkaart, 2013. "How to Enforce Fiscal Discipline in EMU: A Proposal," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 149(II), pages 205-217, June.

    More about this item

    Keywords

    Cyclicality; EMU;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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