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Euro Membership and Fiscal Reaction Functions

Jochen Zimmer and Alfons Weichenrieder ()

Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: Using fiscal reaction functions for a panel of actual euro-area countries the paper investigates whether euro membership has reduced the responsiveness of countries to increases in the level of inherited debt compared to the period prior to succession to the euro. While we find some evidence for such a loss in prudence, the results are not robust to changes in the specification, as for example an exclusion of Greece from the panel. This suggests that the current debt problems may result to a large extent from pre-existing debt levels prior to entry or from a larger need for fiscal prudence in a common currency, while an adverse change in the fiscal reaction functions for most countries does not apply.

JEL-codes: H62 E62 H69 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mac
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https://www.econstor.eu/bitstream/10419/80045/1/VfS_2013_pid_618.pdf (application/pdf)

Related works:
Journal Article: Euro membership and fiscal reaction functions (2014) Downloads
Working Paper: Euro Membership and Fiscal Reaction Functions (2013) Downloads
Working Paper: Euro membership and fiscal reaction functions (2013) Downloads
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