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Do Binding Fiscal Rules Enhance Fiscal Stability? Evidence from European Union Countries

Author

Listed:
  • Jocelyne Zoumenou

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Antonia Lopez Villavicencio

Abstract

This study investigates the impact of fiscal rules on EU countries' fiscal stability, particularly within the Stability and Growth Pact (SGP) framework. By rigorously addressing endogeneity concerns, we show that compliance with budget balance rules (BBR) contributes to fiscal stability. However, countries that comply with all the targets imposed by the SGP simultaneously or that established a constitutional BBR do not perform better than countries that comply exclusively with the budget balance rule. Finally, our results indicate that strong fiscal rules are not necessary to achieve better fiscal discipline.

Suggested Citation

  • Jocelyne Zoumenou & Antonia Lopez Villavicencio, 2024. "Do Binding Fiscal Rules Enhance Fiscal Stability? Evidence from European Union Countries," Working Papers hal-04730739, HAL.
    • Handle: RePEc:hal:wpaper:hal-04730739
    Note: View the original document on HAL open archive server: https://hal.science/hal-04730739v1
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