Budgeting versus implementing fiscal policy in the EU

Roel Maria Wilhelmus Jozef Beetsma, Massimo Giuliodori () and Peter Wierts

No 7285, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using real-time data from Europe's Stability and Convergence Programs, we explore how fiscal plans and their implementation in the EU are determined. We find that (1) implemented budgetary adjustment falls systematically short of planned adjustment and this shortfall increases with the projection horizon, (2) variability in the eventual fiscal outcomes is dominated by the implementation errors, (3) there is a limited role for "traditional" political variables, (4) stock-flow adjustments are more important when plans are more ambitious, and (5), most importantly, both the ambition in fiscal plans and their implementation benefit from stronger national fiscal institutions. We emphasise also the importance of credible plans for the eventual fiscal outcomes.

Keywords: EU; Fiscal policy; fiscal rules; implementation; medium-term budgetary framework; planning; real-time data (search for similar items in EconPapers)
JEL-codes: E62 H60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-pub
Date: 2009-04
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