Economic, Political and Institutional Determinants of Budget Deficits in the European Union

Ali Bayar and Bram Smeets

No 2611, CESifo Working Paper Series from CESifo

Abstract: Using an extended data set of EU countries ranging from 1971-2006 and relevant econometric methods, we investigate the economic, political, and institutional determinants of government deficits in the EU. The results show a strong opportunistic behaviour of policymakers which leads to political business cycles. We find that political fragmentation does not play a significant role in government deficits. Partisan behaviour has a weak effect. The stability of the government has a significant negative impact on the size of the budget deficit. The paper also shows the significant effects of the Maastricht Treaty on fiscal consolidation.

Keywords: fiscal policy; European Monetary Union (search for similar items in EconPapers)
JEL-codes: C33 E62 H60 H87 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2611

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