Fiscal Policy and Monetary Integration in Europe

Galí, Jordi and Roberto Perotti ()
Authors registered in the RePEc Author Service: Jordi Galí

No 3933, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A popular view among economists, policy-makers, and the media, is that the Maastricht Treaty and then Stability and Growth Pact have significantly impaired the ability of EU governments to conduct a stabilizing fiscal policy and to provide an adequate level of public infrastructure. In this Paper, we investigate this view by estimating fiscal rules for the discretionary budget deficit over the period 1980-2002, using data on EMU countries and control groups of non-EMU EU countries and other non-EU OECD countries. We do not find much support for this view. In fact, we find that discretionary fiscal policy in EMU countries has become more counter-cyclical over time, following what appears to be a trend that affects other industrialized countries as well. Similarly, we find that the decline in public investment experienced over the last decade by EMU countries is part of a worldwide trend that started well before the Maastricht Treaty was signed.

Keywords: Stabilization policy; Counter-cyclical fiscal policy; European monetary integration; Fiscal rules (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2003-06
New Economics Papers: this item is included in nep-eec and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (613)

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