New Evidence on the Effectiveness of Europe's Fiscal Restrictions

Marcos Poplawski-Ribeiro

Working Papers from CEPII research center

Abstract: This paper investigates the past effectiveness of the Maastricht Treaty (MT) and Stability and Growth Pact (SGP) in disciplining fiscal policy in the Euro zone. We estimate fiscal reaction functions for a panel of 11 members of the Euro zone including the more recent period of the reformed SGP, and compare them with fiscal responses from other “industrialized” OECD countries. Our main finding is that in contrast with the MT, the SGP has been ineffective in tackling excessive deficits in the Euro zone. Moreover, it has also not induced a countercyclical behavior of the fiscal authorities in the region. These results evince the need for reforms in Europe’s fiscal restrictions in order to restore their credibility.

Keywords: Fiscal restrictions; panel data; Maastricht Treaty; stability and growth pact (search for similar items in EconPapers)
JEL-codes: C33 E62 E65 H62 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2009-13

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