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Estimation of a fiscal policy rule for EMU countries (1984-2005)
[journal article]
Abstract The primary objective of this paper is to estimate a fiscal policy rule for each of the EMU member States from 1984 to 2005 in order to know if there has been a systematic response of the cyclically adjusted primary balance to output gap and debt level variations. Also, we aim to discover whether th... view more
The primary objective of this paper is to estimate a fiscal policy rule for each of the EMU member States from 1984 to 2005 in order to know if there has been a systematic response of the cyclically adjusted primary balance to output gap and debt level variations. Also, we aim to discover whether the change in the fiscal framework which took place after 1992 has had a substantial impact on the fiscal policy applied. The principal novelty is that the estimation is performed simultaneously by means of a SURE (Seemingly Unrelated Regression Estimator) model. We are thus able to obtain different coefficients for each country, while developing possible correlations between national fiscal policies which would reveal the existence of common factors. The results provide clear evidence of a structural break in the rule after the introduction of the new fiscal regulations and, as the hypothesis of equality in the national coefficients of the rule is clearly rejected, reveal a need to consider specific national factors.... view less
Classification
European Politics
Economic Policy
Public Finance
Free Keywords
Fiscal Policy; Policy Rule; European Monetary Union; SURE Models; Stability and Growth Pact
Document language
English
Publication Year
2009
Page/Pages
p. 869-884
Journal
Applied Economics, 41 (2009) 7
DOI
https://doi.org/10.1080/00036840701720739
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)