Euro membership and fiscal reaction functions

Alfons Weichenrieder and Jochen Zimmer

International Tax and Public Finance, 2014, vol. 21, issue 4, 598-613

Abstract: The paper uses fiscal reaction functions for a panel of euro-area countries. We investigate whether euro membership has reduced the responsiveness to shocks in the level of inherited debt. Compared with the performance in the period between signing of the Maastricht Treaty and introduction of the euro, membership has significantly reduced the average responsiveness. Conversely, when compared to the period before the Maastricht Treaty, euro membership is associated with a larger responsiveness. The results are sensitive to changes in the specification, such as an exclusion of Greece from the panel. Copyright Springer Science+Business Media New York 2014

Keywords: Debt sustainability; Fiscal reaction function; Euro area; H62; E62 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (34)

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Working Paper: Euro Membership and Fiscal Reaction Functions (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:21:y:2014:i:4:p:598-613

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DOI: 10.1007/s10797-013-9299-3

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