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Duration of Fiscal 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 explain the probability of ending a fiscal consolidation period. We deal also with those aspects related to sample heterogeneity and the sensitivity of our 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 probability of ending a fiscal consolidation period.

Suggested Citation

  • Reyes Maroto Illera & Carlos Mulas-Granados, "undated". "Duration of Fiscal Consolidations in the European Union," Working Papers 2001-19, FEDEA.
    • Handle: RePEc:fda:fdaddt:2001-19
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    References listed on IDEAS

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    1. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 13-36, National Bureau of Economic Research, Inc.
    2. Mark Hallerberg & Jürgen von Hagen, 1999. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 209-232, National Bureau of Economic Research, Inc.
    3. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-679, June.
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    5. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
    6. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
    7. McCloughan, Patrick & Stone, Ian, 1998. "Life duration of foreign multinational subsidiaries: Evidence from UK northern manufacturing industry 1970-93," International Journal of Industrial Organization, Elsevier, vol. 16(6), pages 719-747, November.
    8. Hallerberg, Mark & von Hagen, Jürgen, 1997. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits within the European Union," CEPR Discussion Papers 1555, C.E.P.R. Discussion Papers.
    9. repec:bla:scandj:v:100:y:1998:i:1:p:367-94 is not listed on IDEAS
    10. Jürgen von Hagen & Andrew Hughes Hallett & Rolf Strauch, 2001. "Budgetary Consolidation in EMU," European Economy - Economic Papers 2008 - 2015 148, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. Mr. Benedict J. Clements & Mr. Sanjeev Gupta & Mr. Emanuele Baldacci & Mr. Carlos Mulas-Granados, 2002. "Expenditure Composition, Fiscal Adjustment, and Growth in Low-Income Countries," IMF Working Papers 2002/077, International Monetary Fund.
    2. Sanjeev Gupta & Emanuele Baldacci & Benedict Clements & Erwin R. Tiongson, 2005. "What sustains fiscal consolidations in emerging market countries?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(4), pages 307-321.
    3. Jochen Mierau & Richard Jong-A-Pin & Jakob de Haan, 2007. "Do political variables affect fiscal policy adjustment decisions? New empirical evidence," Public Choice, Springer, vol. 133(3), pages 297-319, December.
    4. Mr. Benedict J. Clements & Mr. Sanjeev Gupta & Mr. Erwin H Tiongson & Mr. Emanuele Baldacci, 2003. "What Sustains Fiscal Consolidations in Emerging Market Countries?," IMF Working Papers 2003/224, International Monetary Fund.
    5. Juan F. Jimeno, "undated". "Demografía, empleo, salarios y pensiones," Working Papers 2002-04, FEDEA.
    6. Abel Bojar, 2015. "Biting the Hand that Feeds: Reconsidering Partisanship in an Age of Permanent Austerity," LEQS – LSE 'Europe in Question' Discussion Paper Series 91, European Institute, LSE.

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