The impact of fiscal rules on government debt: evidence from the CFA zone

Christine Olivia Strong ()
Additional contact information
Christine Olivia Strong: Old Dominion University

Empirical Economics, 2023, vol. 65, issue 5, No 13, 2357-2391

Abstract: Abstract This paper uses the difference-in-differences method and the synthetic control method (SCM) to estimate the effect of adopting numerical fiscal rules on the debt-to-GDP ratio of CFA zone countries. Using the SCM addresses the self-selection bias issue that has plagued previous studies on the impact of fiscal rules. The SCM compares the post-treatment trajectory of the treated CFA zone countries to that of a counterfactual constructed using similar but untreated donor countries. Our results show that, overall, adopting a stringent numerical debt rule is associated with a statistically significant decrease in the level of debt for CFA zone countries. The effect is stronger for West African CFA zone countries, suggesting that enforcement mechanisms and strong institutions are the key determinants of the de facto effectiveness of fiscal rules.

Keywords: Fiscal rules; Currency union; Government debt; CFA zone (search for similar items in EconPapers)
JEL-codes: C01 E02 E62 H63 O11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1007/s00181-023-02430-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:65:y:2023:i:5:d:10.1007_s00181-023-02430-w

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-023-02430-w

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().