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Determinants of budget deficits in Europe: The role and relations of fiscal rules, fiscal councils, creative accounting and the Euro

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  • Maltritz, Dominik
  • Wüste, Sebastian

Abstract

We analyze the determinants of the budget balance of 27 EU countries from 1991 to 2011 with a panel approach. Our focus is on the effectiveness of fiscal rules and fiscal councils as well as the impact of EMU membership and creative accounting, approximated by stock-flow-adjustments. We especially contribute to the literature by analyzing the joint influence of fiscal rules with fiscal councils and stock-flow-adjustments, measured by their interaction terms. We find a significant influence for fiscal rules and stock-flow-adjustments and as well as under crisis conditions for fiscal councils. Also the interaction variables display influence.

Suggested Citation

  • Maltritz, Dominik & Wüste, Sebastian, 2015. "Determinants of budget deficits in Europe: The role and relations of fiscal rules, fiscal councils, creative accounting and the Euro," Economic Modelling, Elsevier, vol. 48(C), pages 222-236.
    • Handle: RePEc:eee:ecmode:v:48:y:2015:i:c:p:222-236
    DOI: 10.1016/j.econmod.2014.12.001
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    More about this item

    Keywords

    Budget balance; Fiscal deficit; Fiscal rules; Fiscal councils; Creative accounting; European Monetary Union;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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