Sustainability of EU Fiscal Policies: a Panel Test

Peter Claeys

Journal of Economic Integration, 2007, vol. 22, 112-127

Abstract:

The fiscal policy rule implicit in the Stability and Growth Pact, has been rationalised as a way to ensure that national fiscal policies remain sustainable within the EU, thereby endorsing the independence of the ECB. We empirically examine the sustainability of European fiscal policies over the period 1970-2001. The intertemporal government budget constraint provides a test based on the cointegration relation between government revenues, expenditures and interest payments. Sustainability is analysed at both the national level and for a European panel. Results show that European fiscal policy has been sustainable overall, yet national experiences differ considerably.

Keywords: Fiscal policy; Debt sustainability; Panel unit root test; Panel cointegration test; EMU (search for similar items in EconPapers)
JEL-codes: E61 E63 H63 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (32)

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Working Paper: Sustainability of EU fiscal policies, a panel test (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0388

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