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Sustainability of EU fiscal policies, a panel test

  • Peter Claeys


    (Faculty of Economics, University of Barcelona.)

The fiscal policy rule implicit in the Stability and Growth Pact, has been rationalised as a way to ensure that national fiscal policies remain sustainable within the EU, thereby endorsing the independence of the ECB. We empirically examine the sustainability of European fiscal policies over the period 1970-2001. The intertemporal government budget constraint provides a test based on the cointegration relation between government revenues, expenditures and interest payments. Sustainability is analysed at both the national level and for a European panel. Results show that European fiscal policy has been sustainable overall, yet national experiences differ considerably.

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Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 200702.

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Length: 24 pages
Date of creation: Jan 2007
Date of revision: Jan 2007
Handle: RePEc:ira:wpaper:200702
Contact details of provider: Postal: Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona
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  8. Ahmed, Shaghil & Rogers, John H., 1995. "Government budget deficits and trade deficits Are present value constraints satisfied in long-term data?," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 351-374, November.
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  11. Bravo, Ana Bela Santos & Silvestre, Antonio Luis, 2002. "Intertemporal sustainability of fiscal policies: some tests for European countries," European Journal of Political Economy, Elsevier, vol. 18(3), pages 517-528, September.
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