Fiscal Policy and Monetary Integration in Europe

Jordi Galí Y · Roberto Perotti

120 citations0/0 files storedNational Bureau of Economic Research

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Fiscal Policies and Political Economy Global Financial Crisis and Policies European Monetary and Fiscal Policies

Abstract

A popular view among economists, policymakers, 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 countercyclical 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 world-wide trend that started well before the Maastricht Treaty was signed.

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References

1993Discretion versus policy rules in practice 2000Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory*1998Monetary policy rules in practice 1998The Behavior of U. S. Public Debt and Deficits 1998Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory 2003Estimating the Effects of Fiscal Policy in OECD Countries 2002The cyclical behaviour of fiscal policy: evidence from the OECD 1993Excessive Deficits: Sense and Nonsense in the Treaty of Maastricht

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