 The determinants of austerity in the European Union 2010–16Roberto Tamborini and Matteo Tomaselli The North American Journal of Economics and Finance, 2020, vol. 51, issue C Abstract: This paper aims at decteting what drove the adoption of austerity policies over the period 2010–16 in a panel of 28 European countries. Austerity is identified by year increases in the ratio between the structural primary balance and potential GDP. By means of principal component factor analysis we select the aggregate factors that might affect austerity, namely (i) fiscal consolidation (correction of high deficits and debts), (ii) market discipline (high sovereign spreads, low ratings), (iii) rule-based fiscal discipline (compliance with the Eurozone rules), and macroeconomic stabilisation (consideration for the cyclical position of the economy). Then we estimate a dynamic panel model with the system-GMM method. Results show that the most important contributions to austerity are provided by the market discipline and fiscal consolidation factors together with Excessive Deficit Procedures, with no significant role played by concomitant macroeconomic conditions. Overall, governments complied with orthodox fiscal principles and rules. Keywords: Austerity; Fiscal reaction functions; Principal component factor analysis; Dynamic panel data analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s106294081930244x DOI: 10.1016/j.najef.2019.101069 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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