Socio-economic development and fiscal policy: lessons from the cohesion countries for the new member states
Aaron Mehrotra and
Tuomas Peltonen ()
No 467, Working Paper Series from European Central Bank
This paper examines the link between socio-economic development and fiscal policy. We introduce an indicator for socio-economic development (SEDI) and investigate its relationship with different fiscal variables, using data for the cohesion countries, namely Greece, Portugal, Spain and Ireland for 1980-1999. We find that an improvement in the net lending position of the government, as well as a fall in the level of public debt, would be beneficial for socio-economic development in the medium term. Furthermore, fiscal consolidation is found to be more relevant for promoting socio-economic development in the cohesion countries than in the other EU-15 Member States. Our results provide support for incentives to curb spending, such as the fiscal criteria of the Maastricht Treaty or the Stability and Growth Pact. JEL Classification: H6, H5, I0
Keywords: EU enlargement; Fiscal consolidation; socio-economic development; Stability and Growth Pact (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2005467
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