This paper empirically studies whether it pays off (in terms of economic growth) to fulfill the convergence criteria on the public budget and participation in the Euro-zone. The analysis is based on data of European economies with a special focus on twelve Euro-zone members and a control group...

The extent of government deficits and debt has been one of the most debated issues in recent years. However, very little has been contributed about their dynamics . Yet, the issue of entering into and exiting from excessive deficits will be critical in the European monetary union since the...

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...

This paper formulates a dynamic Random Coefficient Model (RCM) to consider a set of popular determinants of public deficits in the EU-15 over the period 1971-2006, both at a country-specific level and from a population-wide perspective. Although the extent of government deficits and debt has...

This paper studies the experiences with fiscal adjustments in the EuropeanUnion (EU) countries during the transition period to the Economic andMonetary Union (EMU). Using several approaches suggested in the literatureon fiscal adjustments and their macroeconomic effects and in the literatureon...

Rather than stabilising aggregate demand, discretionary fiscal policy tends to amplify cyclical fluctuations of output. The commonly accepted reasons are political economy and uncertainty. In the EU, the pro-cyclical nature of discretionary fiscal policy has also been associated with the...

We briefly review the theoretical and empirical consequences of discretionary fiscal policy changes, after which we provide our own estimates for the EU countries. A fiscal expansion raises output and consumption and reduces the trade balance. Moreover, the stimulating effect of higher...

In this paper we suggest that Eurozone countries face a policy trade-off among: 1) a common rule imposing co-movements in fiscal policy; 2) financial stability; and 3) financial integration. We provide empirical evidence documenting the existence of such a trade-off in the period characterized...

This paper studies the impact of national fiscal rules on government size as measured by the ratio of government expenditures to gross domestic product. We develop a model of the budgetary process and show that a common pool problem may arise which can be mitigated through fiscal rules. We test...

This paper characterises rules-based fiscal policy setting. Basically, we translate a standard monetary policy rule into a simple fiscal policy rule. We then infer on fiscal policymakers' reaction coefficients by testing the rule with GMM. Interaction is also tested directly by the inclusion of...