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Duration of Fiscal Budgetary Consolidations in the European Union

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  • Reyes Maroto Illera
  • Carlos Mulas-Granados

Abstract

This paper examines the duration of fiscal consolidations among the fifteen EU Members States using data from the European Commission for the period 1960-2000. Using the duration model approach, we estimate the hazard and survivor functions of our series. Then we discuss what is the duration model that best fits our data, and which are the explanatory variables that best exp lain the probability of ending a fiscal consolidation period. We also deal with those aspects related to sample heterogeneity and the sensitivity of the results to different possible definitions of fiscal adjustment. We find evidence that the probability of ending a period of fiscal consolidation depends on the debt level, the magnitude of the adjustment, the extent of expenditure cuts, and the degree of cabinet fragmentation. We also find that under a stricter definition of fiscal consolidation, political variables, such as coalition size and election year, gain importance with respect to economic variables as predictors of the probability of ending a fiscal consolidation period.

Suggested Citation

  • Reyes Maroto Illera & Carlos Mulas-Granados, 2002. "Duration of Fiscal Budgetary Consolidations in the European Union," European Economy Group Working Papers 18, European Economy Group.
    • Handle: RePEc:eeg:euroeg:18
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    Cited by:

    1. Luca Agnello & Vítor Castro & Ricardo M. Sousa, 2012. "Are there change-points in the likelihood of a fiscal consolidation ending?," NIPE Working Papers 18/2012, NIPE - Universidade do Minho.
    2. Bruno de Paula Rocha & Fabiana Rocha, 2005. "Consolidação Fiscal Nos Estados Brasileiros: Uma Análise De Duração," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33rd Brazilian Economics Meeting] 047, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    3. Ali BAYAR & Bram SMEETS, 2009. "Excessive Deficits in the European Union: An Analysis of Entry and Exit Dynamics," EcoMod2009 21500011, EcoMod.
    4. Agnello, Luca & Castro, Vitor & Sousa, Ricardo M., 2013. "What determines the duration of a fiscal consolidation program?," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 113-134.
    5. Mr. Benedict J. Clements & Mr. Sanjeev Gupta & Mr. Emanuele Baldacci & Mr. Carlos Mulas-Granados, 2004. "Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies?," IMF Working Papers 2004/157, International Monetary Fund.
    6. Agnello, Luca & Castro, Vítor & Sousa, Ricardo M., 2019. "A competing risks tale on successful and unsuccessful fiscal consolidations," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 63(C).
    7. Sourafel Girma, 2005. "Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 281-306, June.
    8. Ali Bayar & Bram Smeets, 2009. "Government Deficits in the European Union: An Analysis of Entry and Exit Dynamics," CESifo Working Paper Series 2703, CESifo.
    9. Marco Buti & Paul Van Den Noord, 2004. "Fiscal Discretion and Elections in the Early Years of EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 737-756, November.
    10. Carlos Mulas-Granados, 2003. "The Trade-Off between Growth & Equality and the Economic Impact of Alternative Fiscal Adjustment Strategies in the EU," European Economy Group Working Papers 20, European Economy Group.
    11. Jaime Turrion & Carmela Martin, 2003. "Eastern Enlargement of the European Union and Foreign Direct Investment Adjustments," European Economy Group Working Papers 24, European Economy Group.
    12. Emanuele Baldacci & Benedict Clements & Sanjeev Gupta & Carlos Mulas‐Granados, 2006. "The Phasing of Fiscal Adjustments: What Works in Emerging Market Economies?," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 612-631, November.

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