The European Union (EU) accepted ten new member states (NMS) in 2004. These countries, mostly former socialist countries, have had to adjust their economic policies to the EU’s standards. Perhaps most difficult has proven to be fiscal policy whereby NMS must comply with the Stability and...

This paper examines whether there is a political budget cycle (PBC) in countries in the euro area. Using a multivariate model for the period 1999-2004 and various election indicators we find strong evidence that the Stability and Growth Pact has not restricted fiscal policy makers in the euro...

In this paper, we track fiscal authority behaviour in the ten new EU member states (NSM) in the period which immediately preceded their EU accession. We first present basic stylized facts about public budgets of those countries. The paper then analyses reasons which led to periods of fiscal...

We analyze motivations for, and possible alternatives to, the Stability and Growth Pact (SGP). With regard to the former, we identify domestic policy failures and various cross-country spillover effects; with regard to the latter, we contrast an “economic-theory" perspective on optimal...

This paper evaluates the Stability and Growth Pact. After examining the rules in place and the experience so far, the Pact is analysed from a political economy perspective, focusing on the choice for so-called soft law and drawing inferences from characteristics of successful fiscal rules at the...

The paper builds a simplified model describing the economy of a currency union with decentralised national fiscal policy, where the main features characterising the policy-making are similar to those in EMU. National governments choose the size of deficit taking into account the two main rules...

In this paper, we set out to examine an efficient fiscal-policy framework for a monetary union. We illustrate that fiscal policy’s bias toward budget deficit only temporarily ceased at the end of the 20th century as European countries endeavored to qualify for euro-zone membership, which...

This paper surveys some recent literature on fiscal policy and comparative politics. Economic policy is viewed as the outcome of a game with multiple-principals and multiple-agents. Opportunistic politicians bargain over policy. Rational voters hold them accountable through retrospective voting....

We present a theoretical model of a parliamentary democracy, where party structures, government coalitions and fiscal policies are endogenously determined. The model predicts that, relative to proportional elections, majoritarian elections reduce government spending because they reduce party...

Ever since its inception EMU has been subject to controversy. The fiscal policy rules embedded in the Treaty on European Union, and clarified in the Stability and Growth Pact (SGP), are probably the most contentious. The SGP is being accused of being too rigid and of forcing pro-cyclicality in...