On the Relationship between Fiscal Plans in the European Union: An Empirical Analysis Based on Real-Time Data

Roel Beetsma and Massimo Giuliodori ()

No 6088, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate the interdependence of fiscal policies, and in particular deficits, in the European Union using an empirical analysis based on real-time fiscal data. There are many potential reasons why fiscal policies could be interdependent, such as direct externalities due to cross-border public investments, yardstick competition, tax competition and peer pressure among governments. The advantage of using real-time data is that they better reflect the policymakers? intentions than revised data. Real-time data allow us to investigate how available information is mapped into policymakers? plans, while revised data are generally 'polluted' with ad hoc reactions to unexpected developments that have taken place after the plan was made. Controlling for a large set of relevant determinants of primary cyclically adjusted deficits, we find indeed evidence of fiscal policy interdependence. However, the interdependence is rather asymmetrically distributed: the fiscal stances of the large countries affect the fiscal stances of the small countries, but not vice versa.

Keywords: Fiscal policy interdependence; Real-time data; European union; Monetary union; Primary cyclically adjusted deficit (search for similar items in EconPapers)
JEL-codes: E62 H60 (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://cepr.org/publications/DP6088 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: On the relationship between fiscal plans in the European Union: An empirical analysis based on real-time data (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:6088

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP6088

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().