FISCAL CONVERGENCE IN THE EUROPEAN UNION BEFORE THE CRISIS

Silvia Bertarelli, Roberto Censolo and Caterina Colombo ()

Contemporary Economic Policy, 2014, vol. 32, issue 4, 784-801

Abstract: type="main" xml:id="coep12073-abs-0001"> This article investigates fiscal convergence attained by EU countries in the period 1991–2008, by employing β- and σ-convergence techniques complemented by a time series analysis. Overall our results highlight a distinctive convergence pattern in the European Union. Fiscal discipline leading to a fast convergence of deficit/GDP ratio over the 1990s markedly weakened in the following decade. Nonetheless, after the Euro debut a pronounced convergence in total revenue and total government spending emerges, with different patterns characterizing each expenditure component. Despite this evidence of fiscal harmonization, European treaties failed to attract countries toward a common share of government debt over GDP. (JEL E61, H11, C23)

Date: 2014
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