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Bunching at 3 Percent: The Maastricht Fiscal Criterion and Government Deficits


  • Francesca G Caselli
  • Philippe Wingender


This paper estimates the effects of the Maastricht treaty’s fiscal criterion on EU countries’ general government deficits. We combine treatment effects methods with bunching estimation, and find that the 3 percent deficit rule acts as a “magnet”, increasing the number of observations around the threshold, while reducing the occurrence of both large government deficits and surpluses. After the rule is adopted, the distribution of government deficits among EU countries displays 20 percent excess mass around the deficit ceiling compared to a counterfactual distribution in which countries have the same observable characteristics but without the fiscal rule. Most of the bunching response comes from a reduction in the number of high deficit observations. We also find that the average treatment effect on fiscal deficits is positive and statistically significant. Finally, we derive country-specific impacts under a rank invariance assumption and find that all EU countries have seen their fiscal position improve on average as a result of the deficit rule.

Suggested Citation

  • Francesca G Caselli & Philippe Wingender, 2018. "Bunching at 3 Percent: The Maastricht Fiscal Criterion and Government Deficits," IMF Working Papers 18/182, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:18/182

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    Cited by:

    1. Antonio Fatás & Atish R. Ghosh & Ugo Panizza & Andrea F Presbitero, 2019. "The Motives to Borrow," IMF Working Papers 19/101, International Monetary Fund.
    2. Loewald, Christopher & Wörgötter, Andreas, 2019. "Do monetary unions dream of structural reforms?," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 01/2019, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
    3. Jasper de Jong & Niels Gilbert, 2018. "Fiscal discipline in EMU? Testing the effectiveness of the Excessive Deficit Procedure," DNB Working Papers 607, Netherlands Central Bank, Research Department.


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