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Empirical Economics
Erschienen in: Empirical Economics 2/2016

01.09.2016

Are European fiscal rules that bad? Discretionary fiscal policies in New Member States

verfasst von: Bettina Fincke, Marcin Wolski

Erschienen in: Empirical Economics | Ausgabe 2/2016

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Abstract

There is no clear-cut evidence on how the adoption of the European fiscal standards influences discretionary fiscal policies within the Member States. This study investigates that phenomenon on the example of the 2004 enlargement. The results show that the effects of the adoption of EU fiscal rules bring a statistically significant change toward more counter-cyclical behavior. The results are robust for different model specifications, including alternative time spans and correcting for the possible influence of the financial crises and political forces. Interestingly, the year 2004 did not have any significant impact on the change in fiscal policies in the Old Member States, suggesting that the EU entry might motivate new members to run more prudent budgetary policies.
Vorheriger Artikel Testing for a housing bubble at the national and regional level: the case of Israel
Nächster Artikel Financial frictions in Latvia

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Fußnoten
1
For a detailed analysis of the evolution of fiscal rules in the EU, see Wyplosz (2006).
 
2
The term ’acyclical’ refers to Gali and Perotti (2003) and means that there was no significant impact of discretionary policy on the business cycle fluctuations.
 
3
In the analysis, we focus on the period from Q1 2000 until Q2 2008 in order to avoid possible spurious relations caused by the global financial crisis and the sovereign debt crisis.
 
4
Candelon et al. (2010) applies the dynamic panel method to correct for the endogeneity bias. Originally, the dynamic panel technique was designed for large-N and small-T samples, meaning for settings with many individuals and limited number of periods. In our data set, however, we observe the opposite. Therefore, we favor the panel IV technique over the dynamic panel methods. Nevertheless, we apply the dynamic panel estimation as a robustness check, confirming our main findings.
 
5
More detailed and disaggregated figures based on countrywise data are included in ‘Appendix 1.’
 
6
See also Darby and Melitz (2008) for that discussion.
 
7
This outlier does not bring any qualitative change to the estimation results so as to the final inference. Therefore, we decide to leave it in the data set in order to make it more methodology consistent.
 
8
Recently, many studies use real-time data (Beetsma and Giuliodori 2008; Lewis 2009). However, we resort to ‘conventional’ final data as availability may be a crucial issue here.
 
9
This number is strongly influenced by Ireland, as Fig. 7 reveals.
 
10
Due to data availability, the Romanian interest rate until 2005 is the treasury bill rate.
 
11
All the breaking points with rank 1 are considered to be the most likely candidates for the structural change.
 
12
All the estimations have been implemented in STATA 12.
 
13
The results are robust to all the other model specifications.
 
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Metadaten
Titel
Are European fiscal rules that bad? Discretionary fiscal policies in New Member States
verfasst von
Bettina Fincke
Marcin Wolski
Publikationsdatum
01.09.2016
Verlag
Springer Berlin Heidelberg
Erschienen in
Empirical Economics / Ausgabe 2/2016
Print ISSN: 0377-7332
Elektronische ISSN: 1435-8921
DOI
https://doi.org/10.1007/s00181-015-1006-z

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