FISCAL ACTIVISM IN EUROPEAN REGIONS: EVIDENCE ON FISCAL RULES BEFORE AND AFTER THE EURO

Georgios Karras

Regional Science Inquiry, 2015, vol. VII, issue 1, 21-34

Abstract: The introduction of the euro has been followed by noticeable fiscal divergence between the core and the periphery economies. This paper investigates the basic properties of fiscal policy in Europe and asks whether these properties are affected by euro membership. The empirical findings suggest that fiscal policy has been decisively countercyclical and generally sustainable. Adopting the euro raises the average country member's primary deficit by about 0.5% of GDP within a year and the effect accumulates to 1.76% of GDP ten years later, but these dynamic responses are far more pronounced in the periphery economies than in the core.

Keywords: Fiscal Rules; Euro zone; Fiscal Policy (search for similar items in EconPapers)
JEL-codes: E62 F45 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hrs:journl:v:vii:y:2015:i:1:p:21-34

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