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Determinants of fiscal budget volatility in old versus new EU member states

  • Eugenia-Ramona Mara

In this study we perform an analysis of the volatility of the budget deficit for EU countries. We address this issue starting from the new requirements of fiscal discipline imposed by the Treaty on Stability, Coordination and Governance adopted by 25 European Union member states and taking into account the economic crisis impact. The major purpose of this study is to identify the most significant determinants of budget deficit volatility in a comparative study for old EU member states and New Member States (NMS). This study aims to test the impact of macroeconomic variables such as public expenditures, economic growth rate, and unemployment on the budget balance volatility, based on panel data. The final purpose of the article is to reveal the strategies to stop the immense increase in fiscal deficits and to regain fiscal stability to fulfil the new rules of fiscal governance. We anticipate that the implementation of this new fiscal discipline requires a more efficient public sector for both old and NMS and a reconsideration of state intervention in the economy. JEL Classification: H62; E62; H3; H61;

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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2012/31.

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Date of creation: Sep 2012
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Handle: RePEc:ise:isegwp:wp312012
Contact details of provider: Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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  1. Vítor Castro, 2007. "The Causes of Excessive Deficits in the European Union," NIPE Working Papers 13/2007, NIPE - Universidade do Minho.
  2. Agnello, Luca & Sousa, Ricardo M., 2009. "The determinants of public deficit volatility," Working Paper Series 1042, European Central Bank.
  3. Afonso, António & Furceri, Davide, 2008. "Government size, composition, volatility and economic growth," Working Paper Series 0849, European Central Bank.
  4. Ant�nio Afonso & Jo�o Tovar Jalles, 2012. "Fiscal volatility, financial crises and growth," Applied Economics Letters, Taylor & Francis Journals, vol. 19(18), pages 1821-1826, December.
  5. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
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