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Entry and Exit Dynamics of 'Excessive Deficits' in the European Union

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  • Ali Bayar

Abstract

The extent of government deficits and debt has been one of the most debated issues in recent years. However, very little has been contributed about their dynamics . Yet, the issue of entering into and exiting from excessive deficits will be critical in the European monetary union since the Stability and Growth Pact rules out deficits larger than 3 percent of GDP, except under strictly defined unusual conditions. This paper provides a transition data analysis of the dynamics of public deficits. It shows the asymmetric role pl a yed by the economic determinants in theses dynamics and estimates the evolution of the probability of entering into and exiting from excessive deficits for each one of the member states of the European Union since 1970. It also reveals how the concurrence of some minor changes may produce a major switchover in public finance outcomes. Finally, it points to the fragility of some countries even if they are now out of excessive deficits.

Suggested Citation

  • Ali Bayar, 1999. "Entry and Exit Dynamics of 'Excessive Deficits' in the European Union," CESifo Working Paper Series 216, CESifo.
    • Handle: RePEc:ces:ceswps:_216
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    File URL: https://www.cesifo.org/DocDL/cesifo_wp216.pdf
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    References listed on IDEAS

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    Cited by:

    1. Strauch, Rolf, 1999. "Monitoring fiscal adjustments in the European Union and EMU," Discussion Paper Series 1: Economic Studies 1999,04, Deutsche Bundesbank.

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