Fiscal Policy and Monetary Integration in Europe: An Update
By distinguishing between discretionary and non-discretionary fiscal policy, this paper analyses the stability of fiscal rules for EMU countries before and after the Maastricht Treaty. Using both Instrumental Variables and GMM techniques, it turns out that discretionary fiscal policy remains procyclical after 1992. This result contradicts the previous findings of Galí and Perotti (2003). It also appears that fiscal rules differ between large and small countries: especially large countries follow a procyclical discretionary policy. Furthermore, the paper shows that discretionary fiscal policy does exhibit different behaviour facing supply or demand constraints. The procyclical discretionary policy is followed mainly during upswings, when supply constraints are prevalent. Finally, there is no support for the presence of a ‘fatigue effect’ in fiscal discipline.
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| Length: | |
| Date of creation: | 2007 |
| Handle: | RePEc:unm:umamet:2007050 |
| Contact details of provider: | Postal: P.O. Box 616, 6200 MD Maastricht Phone: +31 (0)43 38 83 830 Web page: http://www.maastrichtuniversity.nl/ Email: More information through EDIRC
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- Wren-Lewis, Simon, 2000. "The Limits to Discretionary Fiscal Stabilization Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 92-105, Winter.
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- Beetsma, Roel M. W. J. & Jensen, Henrik, 2004. "Mark-up fluctuations and fiscal policy stabilization in a monetary union," Journal of Macroeconomics, Elsevier, vol. 26(2), pages 357-376, June.
- Beetsma, Roel & Jensen, Henrik, 2003. "Mark-Up Fluctuations and Fiscal Policy Stabilization in a Monetary Union," CEPR Discussion Papers 4020, C.E.P.R. Discussion Papers.
- von Hagen, Jürgen, 2005. "Fiscal Rules and Fiscal Performance in the EU and Japan," CEPR Discussion Papers 5330, C.E.P.R. Discussion Papers.
- Hagen, Jürgen von, 2006. "Fiscal Rules and Fiscal Performance in the EU and Japan," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 147, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- von Hagen, Jürgen, 2003. "Fiscal discipline and growth in Euroland: Experiences with the stability and growth pact," ZEI Working Papers B 06-2003, University of Bonn, ZEI - Center for European Integration Studies.
- Jakob de Haan & Helge Berger & David-Jan Jansen, 2003. "The End of the Stability and Growth Pact?," CESifo Working Paper Series 1093, CESifo Group Munich.
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- Forni, Lorenzo & Momigliano, Sandro, 2004. "Cyclical sensitivity of fiscal policies based on real-time data," MPRA Paper 4315, University Library of Munich, Germany.
- Lorenzo Forni & Sandro Momigliano, 2004. "Cyclical sensitivity of fiscal policies based on real-time data," Temi di discussione (Economic working papers) 540, Bank of Italy, Economic Research and International Relations Area.
- Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
- Galí, Jordi & Perotti, Roberto, 2003. "Fiscal Policy and Monetary Integration in Europe," CEPR Discussion Papers 3933, C.E.P.R. Discussion Papers.
- Carlos Marinheiro, 2005. "Has the Stability and Growth Pact stabilised? Evidence from a panel of 12 European countries and some implications for the reform of the Pact," GEMF Working Papers 2005-02, GEMF, Faculty of Economics, University of Coimbra.
- Carlos Fonseca Marinheiro, 2005. "Has the Stability and Growth Pact Stabilised? Evidence from a Panel of 12 European Countries and Some Implications for the Reform of the Pact," CESifo Working Paper Series 1411, CESifo Group Munich.
- Carlos José Fonseca Marinheiro, 2005. "Has the Stability and Growth Pact stabilised? Evidence from a panel of 12 European countries and some implications for the reform of the Pact," Working Papers de Economia (Economics Working Papers) 31, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
- Hallerberg, Mark & Strauch, Rolf & von Hagen, Jurgen, 2007. "The design of fiscal rules and forms of governance in European Union countries," European Journal of Political Economy, Elsevier, vol. 23(2), pages 338-359, June.
- Strauch, Rolf & Hallerberg, Mark & von Hagen, Jürgen, 2004. "The design of fiscal rules and forms of governance in European Union countries," Working Paper Series 419, European Central Bank.
- Hallerberg, Mark & Strauch, Rolf & Hagen, Jürgen von, 2006. "The design of fiscal rules and forms of governance in European Union countries," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 150, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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