Fiscal policies and business cycles in an enlarged euro area

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. [1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005], the fiscal balance exhibits less inertia and is more counter-cyclical in Central and Eastern European countries than in members of the eurozone. The main differences arise from the revenue side. Differences in the formation of fiscal policy between current and future eurozone countries decrease over time. Autonomous fiscal policy has little or no effect on cyclical variability in either of the two groups of countries. Counter-cyclical fiscal policy appears to be effective in Central and Eastern European countries, but largely ineffective in eurozone countries. Terms of use: Documents in EconStor mayJEL Code: E62, E63, E32.

The European debt crisis and fiscal reactions in Europe 2000–2014

“…The primary balance exhibits somewhat higher persistence for the EA12 group than for the CEE10 group, which is a result observed previously (Staehr 2008). This suggests that after episodes in which the primary balance has attained extreme realisations, it adjusts more slowly in the EA12 countries than in the CEE10 countries.…”

“…The division into the EA12 and CEE10 groups is predicated on studies showing that the fiscal reaction functions differ across the two regions. Staehr (2008) finds that the budget balance is more persistent and more counter-cyclical in Western Europe than in Central and Eastern Europe. This is consistent with the finding that persistence is generally greater in advanced economies than in developing and transition countries (Fatas & Mihov 2001.…”

“…Many empirical studies find that fiscal policy is typically countercyclical in developed economies, while it is pro-cyclical in emerging economies (Ilzetzki & Vegh 2008, Afonso et al 2008. Staehr (2008) shows that although the fiscal balance is counter-cyclical in all parts of Europe, it is much more counter-cyclical in Western Europe than in the transition countries of Central and Eastern Europe. Egert (2010) provides a detailed analysis of the cyclicality of the fiscal stance in the OECD countries and confirms that it is counter-cyclical in this group of countries.…”

“…Wyplosz (2006), Staehr (2008) and others apply the same methodology to European datasets and find some evidence of positive feedback from the debt stock to the primary balance but also conclude that the feedback is difficult to estimate precisely because the data series are short. Piergallini & Postigliola (2012) find that the primary balance in Italy has exhibited a positive reaction to the debt stock and conclude that politicians have taken corrective measures to ensure the sustainability of public finances in Italy.…”

Are Euro-Area expectations about recession phases effective to anticipate consequences of economic crises?

“…This issue can certainly affect expectations of agents for future disturbances. Empirical and theoretical evidence shows that public policies across Euro Area are homogenous (Kose et al 2012;Calderón and Fuentes 2014); nevertheless, there are still important differences across these countries (Krolzig and Toro 2005;Staehr 2008;Krugman et al 2012;Kolasa 2013). For this reason, recession phases can be triggered by different roots and can have different characteristics among Euro-Area countries.…”