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Empirical Economics

, Volume 51, Issue 2, pp 517–546 | Cite as

Are European fiscal rules that bad? Discretionary fiscal policies in New Member States

  • Bettina Fincke
  • Marcin Wolski
Article

Abstract

There is no clear-cut evidence on how the adoption of the European fiscal standards influences discretionary fiscal policies within the Member States. This study investigates that phenomenon on the example of the 2004 enlargement. The results show that the effects of the adoption of EU fiscal rules bring a statistically significant change toward more counter-cyclical behavior. The results are robust for different model specifications, including alternative time spans and correcting for the possible influence of the financial crises and political forces. Interestingly, the year 2004 did not have any significant impact on the change in fiscal policies in the Old Member States, suggesting that the EU entry might motivate new members to run more prudent budgetary policies.

Keywords

Discretionary fiscal policy New Member States Counter-cyclical policies Fiscal rules 

JEL Classification

E62 O52 

Notes

Acknowledgments

Authors would like to thank Cees Diks, the participants of the 11th Annual NBP-SNB Joint Seminar in Starawieś, two anonymous referees and the editor for valuable comments. Any views expressed are only those of authors and do not necessarily represent the views of the European Investment Bank.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.Bielefeld UniversityBielefeldGermany
  2. 2.European Investment BankLuxembourgLuxembourg

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