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Country-specific fiscal reaction functions: what lessons for EMU ?

Amélie Barbier-Gauchard (abarbier@unistra.fr) and Nicolas Mazuy

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: This paper deals with heterogeneous fiscal behaviors of euro area countries. We estimate EMU Members States fiscal reaction function using time series approach covering the period 1990 :Q1-2017 :Q2. Among the major lessons from this analysis, three general and striking results are worth highlighting : (1) factors explaining national fiscal reaction function in the short run differ from those in the long run, (2) some explanatory variables seem common to all countries while others only concern a small number of countries and (3) the sign of the impact of these explanatory variables can also differ between the countries. Finally, this paper raises the implications of heterogeneous fiscal policies on the functioning of monetary union and asks the question of fiscal convergence in the euro area.

Keywords: fiscal reaction functions; euro area; error correction model; heterogeneity. (search for similar items in EconPapers)
JEL-codes: C33 C41 E62 H61 H62 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2018-28

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