Fiscal Deficits in Monetary Unions: A Comparison of EMU and United States

Philip Arestis, Mosahid Khan and Kul Luintel ()

Eastern Economic Journal, 2002, vol. 28, issue 1, 89-103

Abstract: The stringent deficit criterion followed by the EMU is motivated by the belief that a sustainable fiscal arrangement is a must for a viable monetary union. In this paper we provide an empirical analysis of the issue of deficit convergence in the Euro area and compare and contrast the Euro-zone deficit with the US federal deficit. We find (i) evidence of fiscal convergence in most of the Euro-11 countries; (ii) achievement of 3% criteria by all Euro-countries immediately before the launch of the Euro; (iii) similar magnitudes and variability of deficit in Euro-11 and US and that (iv) Europe is subjected to smaller fiscal shocks than the US.

Keywords: Deficit; EMU; Monetary Union; Monetary (search for similar items in EconPapers)
JEL-codes: E42 E62 F33 F36 H62 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:28:y:2002:i:1:p:89-103

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