IDEAS home Printed from https://ideas.repec.org/a/hrs/journl/vviiy2015i1p21-34.html
   My bibliography  Save this article

Fiscal Activism In European Regions: Evidence On Fiscal Rules Before And After The Euro

Author

Listed:
  • Georgios KARRAS

    (Department of Economics, University of Illinois at Chicago, 601 S. Morgan St., Chicago, IL 60607 7121)

Abstract

The introduction of the euro has been followed by noticeable fiscal divergence between the core and the periphery economies. This paper investigates the basic properties of fiscal policy in Europe and asks whether these properties are affected by euro membership. The empirical findings suggest that fiscal policy has been decisively countercyclical and generally sustainable. Adopting the euro raises the average country member's primary deficit by about 0.5% of GDP within a year and the effect accumulates to 1.76% of GDP ten years later, but these dynamic responses are far more pronounced in the periphery economies than in the core.

Suggested Citation

  • Georgios KARRAS, 2015. "Fiscal Activism In European Regions: Evidence On Fiscal Rules Before And After The Euro," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 21-34, June.
    • Handle: RePEc:hrs:journl:v:vii:y:2015:i:1:p:21-34
    as

    Download full text from publisher

    File URL: http://www.rsijournal.eu/ARTICLES/June_2015/2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrew Mountford & Harald Uhlig, 2009. "What are the effects of fiscal policy shocks?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 960-992.
    2. Riera-Crichton, Daniel & Vegh, Carlos A. & Vuletin, Guillermo, 2015. "Procyclical and countercyclical fiscal multipliers: Evidence from OECD countries," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 15-31.
    3. Michael Woodford, 2011. "Simple Analytics of the Government Expenditure Multiplier," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(1), pages 1-35, January.
    4. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    5. Alan J. Auerbach, 2009. "Implementing the New Fiscal Policy Activism," American Economic Review, American Economic Association, vol. 99(2), pages 543-549, May.
    6. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2011. "When Is the Government Spending Multiplier Large?," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 78-121.
    7. Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2010. "New Keynesian versus old Keynesian government spending multipliers," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 281-295, March.
    8. Robert E. Hall, 2009. "By How Much Does GDP Rise If the Government Buys More Output?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 183-249.
    9. Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
    10. Lane, Philip R., 2003. "The cyclical behaviour of fiscal policy: evidence from the OECD," Journal of Public Economics, Elsevier, vol. 87(12), pages 2661-2675, December.
    11. Valerie A. Ramey, 2011. "Can Government Purchases Stimulate the Economy?," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 673-685, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amitrajeet A. BATABYAL & Seung Jick YOO, 2022. "A Theoretical Analysis Of Costs, Waste Treatment, Pollution In The Ganges, And Leather Production By Tanneries In Kanpur, India," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 47-53, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Banerjee, Ryan & Zampolli, Fabrizio, 2019. "What drives the short-run costs of fiscal consolidation? Evidence from OECD countries," Economic Modelling, Elsevier, vol. 82(C), pages 420-436.
    2. Andrea Boitani & Salvatore Perdichizzi, 2018. "Public Expenditure Multipliers in recessions. Evidence from the Eurozone," DISCE - Working Papers del Dipartimento di Economia e Finanza def068, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    3. Javier Andrés & José Emilio Boscá & Javier Ferri, 2011. "Household Leverage and Fiscal Multipliers," Working Papers 1103, International Economics Institute, University of Valencia.
    4. Valerie A. Ramey, 2019. "Ten Years after the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?," Journal of Economic Perspectives, American Economic Association, vol. 33(2), pages 89-114, Spring.
    5. Wataru Miyamoto & Thuy Lan Nguyen & Dmitriy Sergeyev, 2018. "Government Spending Multipliers under the Zero Lower Bound: Evidence from Japan," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(3), pages 247-277, July.
    6. Dupaigne, Martial & Fève, Patrick, 2016. "Persistent government spending and fiscal multipliers: The investment-channel," European Economic Review, Elsevier, vol. 89(C), pages 425-453.
    7. Riera-Crichton, Daniel & Vegh, Carlos A. & Vuletin, Guillermo, 2016. "Tax multipliers: Pitfalls in measurement and identification," Journal of Monetary Economics, Elsevier, vol. 79(C), pages 30-48.
    8. Virkola, Tuomo, 2014. "Exchange Rate Regime, Fiscal Foresight and the Effectiveness of Fiscal Policy in a Small Open Economy," ETLA Reports 20, The Research Institute of the Finnish Economy.
    9. Giancarlo Corsetti & André Meier & Gernot J. Müller, 2012. "What determines government spending multipliers? [Mafia and public spending: Evidence of the fiscal multiplier from a quasi-experiment’, mimeo]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 27(72), pages 521-565.
    10. Salvatore Perdichizzi, 2017. "Estimating Fiscal multipliers in the Eurozone. A Nonlinear Panel Data Approach," DISCE - Working Papers del Dipartimento di Economia e Finanza def058, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    11. Charles J. Whalen & Felix Reichling, 2015. "The Fiscal Multiplier And Economic Policy Analysis In The United States," Contemporary Economic Policy, Western Economic Association International, vol. 33(4), pages 735-746, October.
    12. Georgios Karras, 2014. "Is Fiscal Policy More Effective During Cyclical Downturns?," International Economic Journal, Taylor & Francis Journals, vol. 28(2), pages 255-271, June.
    13. Atems, Bebonchu, 2019. "The effects of government spending shocks: Evidence from U.S. states," Regional Science and Urban Economics, Elsevier, vol. 74(C), pages 65-80.
    14. Sebastian Gechert, 2015. "What fiscal policy is most effective? A meta-regression analysis," Oxford Economic Papers, Oxford University Press, vol. 67(3), pages 553-580.
    15. Oh, Hyunseung & Reis, Ricardo, 2012. "Targeted transfers and the fiscal response to the great recession," Journal of Monetary Economics, Elsevier, vol. 59(S), pages 50-64.
    16. Quaghebeur, Ewoud, 2019. "Learning And The Size Of The Government Spending Multiplier," Macroeconomic Dynamics, Cambridge University Press, vol. 23(8), pages 3189-3224, December.
    17. Valerie A. Ramey, 2020. "The Macroeconomic Consequences of Infrastructure Investment," NBER Chapters, in: Economic Analysis and Infrastructure Investment, pages 219-268, National Bureau of Economic Research, Inc.
    18. Javier Andrés & José E. Boscá & Javier Ferri, 2016. "Instruments, rules, and household debt: the effects of fiscal policy," Oxford Economic Papers, Oxford University Press, vol. 68(2), pages 419-443.
    19. Felix Reichling & Charles Whalen, 2015. "The Fiscal Multiplier and Economic Policy Analysis in the United States: Working Paper 2015-02," Working Papers 49925, Congressional Budget Office.
    20. Kuckuck, Jan & Westermann, Frank, 2014. "On the size of fiscal multipliers: A counterfactual analysis," Economics Letters, Elsevier, vol. 123(1), pages 26-32.

    More about this item

    Keywords

    Fiscal Rules; Euro zone; Fiscal Policy;
    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
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hrs:journl:v:vii:y:2015:i:1:p:21-34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dimitrios K. Kouzas (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.