The aim of this paper is to investigate the influence of fiscal rules on the budgetary outcomes in 27 European Union countries. In particular, the paper focuses on assessing whether the impact of fiscal rules is statistically significant and numerically meaningful. In order to assess the influence, we use a dynamic panel data model. In our baseline model, we introduce the fiscal rule index as an explanatory variable. Our estimation rests on the fiscal reaction function. The analysis shows that the fiscal rule index positively affects the cyclically-adjusted primary balance and the cyclicallyadjusted balance.
Afonso, A. – Hauptmeier, S. (2009): Fiscal Behaviour in the European Union: Rules, Fiscal Decentralization and Government Indebtedness. European Central Bank Working Paper Series, No. 1054.
Afonso, A. – Guimarães, A. S. (2014): The Relevance of Fiscal Rules and Yield Developments. Lisboa School of Economics and Management Working Paper, No. WP05/2014/DE/UECE.
Alesina, A. – Bayoumi, T. (1996): The Costs and Benefits of Fiscal Rules: Evidence from U.S. States. NBER Working Paper, No. 5614.
Alesina, A. F. – Perotti, R. (1999): Budget Deficits and Budget Institutions. In: Poterba, J. M. (ed.): Fiscal Institutions and Fiscal Performance. University of Chicago Press, pp. 13–36.
Arellano, M. – Bond, S. (1991): Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies, 58(2): 277–297.
Arellano, M. – Bover, O. (1995): Another Look at the Instrumental Variable Estimation of Error- Components Models. Journal of Econometrics, 68(1): 29–51.
Ayuso-i-Casals, J. (2012): National Expenditure Rules: Why, How and When. European Economy – Economic Papers, No. 473.
Ayuso-i-Casals, J. – Debrun, X. – Kumar, M. S. – Moulin, L. – Turrini, A. (2007): Beyond the SGP. Features and Effects of EU National-level Fiscal Rules. In: Deroose, S. – Flores, E. – Turrini, A. (eds): The Role of Fiscal Rules and Institutions in Shaping Budgetary Outcomes. Proceedings from the ECFIN Workshop, Brussels, 24 November 2006, pp. 191–242.
Balassone, F. – Franco, D. (2001): EMU Fiscal Rules: A New Answer to an Old Question? In: Fiscal Rules. Banca d’Italia, Research Department Public Finance Workshop. Papers presented at the Bank of Italy Workshop, Perugia, 1–3 February 2001, pp. 33–58.
Balatoni, A. (2015): A Simple Fiscal Rule for Hungary. Acta Oeconomica, 65(Special Issue 1): 151–161.
Bayoumi, T. A. – Eichengreen, B. J. (1995): Restraining Yourself: The Implications of Fiscal Rules for Economic Stabilization. Staff Papers, International Monetary Fund, 42(1): 32–48.
Birashi, P. (2008): Searching for the Optimal EMU Fiscal Rule: An Ex-Post Analysis of the SGP Reform Proposals. Italian Ministry of Economy and Finance Working Paper, No. 7.
Blundell, R. – Bond, S. (1998): Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Econometrics, 87(1): 115–143.
Blundell, R. – Bond, S. – Windmeijer, F. (2000): Estimation in Dynamic Panel Data Models: Improving on the Performance of the Standard GMM Estimator. Institute for Fiscal Studies Working Papers, W00/12.
Bohn, H. (1998): The Behavior of U.S. Public Debt and Deficits. The Quarterly Journal of Economics, 113(3): 949–963.
Bohn, H. – Inman, R. P. (1996): Balanced Budget Rules and Public Deficits: Evidence from the U.S. States. NBER Working Paper, No. 5533.
Buiter, W. H. (2003): Ten Commandments for a Fiscal Rule in the E(M)U. Oxford Review of Economic Policy, 19(1): 84–99.
Buiter, W. H. – Grafe, C. (2004): Patching up the Pact. Economics of Transition, 12(1): 67–102.
Buti, M. – Eijffinger, S. – Franco, D. (2003): Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment? European Commission Economic Papers, No. 180, January.
Buti, M. – Franco, D. (2005): Fiscal Policy in Economic and Monetary Union: Theory, Evidence and Institutions. Edward Elgar.
Buti, M. – van den Noord, P. (2004): Fiscal Policy in EMU: Rules, Discretion and Political Incentives. European Economy – Economic Papers, No. 206.
Combes, J. L. – Debrun, X. – Minea, A. – Tapsoba, R. (2014): Inflation Targeting and Fiscal Rules: Do Interactions and Sequencing Matter? IMF Working Paper, No. 14/89.
De Grauwe, P. (2000): Economics of Monetary Union. Oxford University Press.
Debrun, X. – Epstein, N. P. – Symansky, S. A. (2008): A New Fiscal Rule: Should Israel Go Swiss? IMF Working Papers, No. 08/87.
Debrun, X. – Kumar, M. S. (2007): The Discipline-Enhancing Role of Fiscal Institutions: Theory and Empirical Evidence. IMF Working Paper, No. WP/07/171.
Debrun, X. – Moulin, L. – Turrini, A. – Ayuso-i-Casals, J. – Kumar, M. S. (2008): Tied to the Mast? National Fiscal Rules in the European Union. Economic Policy, 23(54): 297–362.
Deroose, S. – Moulin, L. – Wierts, P. (2006): National Expenditure Rules and Expenditure Outcomes: Evidence for EU Member States. Wirtschaftspolitische Blätter, 53(1): 27–41.
Eichengreen, B. J. – Bayoumi, T. A. (1994): The Political Economy of Fiscal Restrictions: Implications for Europe from the United States. European Economic Review, 38(3–4): 783–791.
Emmerson, C. – Frayne, Ch. – Love, S. (2004): Updating the UK’s Code for Fiscal Stability. The Institute for Fiscal Studies Working Paper, No. WP04/29.
European Commission (2006): Public Finances in EMU 2006. European Economy, No. 3/2006.
European Commission (2009): Public Finances in EMU 2009. European Economy, No. 5/2009.
Fatas, A. – Mihov, I. (2006): The Macroeconomic Effects of Fiscal Rules in the US States. Journal of Public Economics, 90(1–2): 101–117.
Favero, C. – Monacelli, T. (2005): Fiscal Policy Rules and Regime (In)Stability: Evidence from the U.S. IGIER (Innocenzo Gasparini Institute for Economic Research) Working Paper, No. 282.
Gali, J. – Perotti, R. (2003): Fiscal Policy and Monetary Integration in Europe. Economic Policy, 18(37): 533–572.
Golinelli, R. – Momigliano, S. (2008): The Cyclical Response of Fiscal Policies in the Euro Area. Why do Results of Empirical Research Differ so Strongly? Economic Working Papers, No. 654, Bank of Italy, Economic Research and International Relations Area.
Hallerberg, M. – Wolff, G. (2008): Fiscal Institutions, Fiscal Policy and Sovereign Risk Premia in EMU. Public Choice, 136 (3–4): 379–396.
Holm-Hadulla, F. – Hauptmeier, S. – Rother, P. (2010): The Impact of Numerical Expenditure Rules on Budgetary Discipline over the Cycle. ECB Working Paper, No. 1169.
IMF (2009): Fiscal Rules-Anchoring Expectations for Sustainable Public Finances. Fiscal Affairs Department. Washington, D.C.
IMF (2013): The Functions and Impact of Fiscal Councils. Washington, D.C.
Inman, R. P. (1996): Do Balanced Budget Rules Work? U.S. Experience and Possible Lessons for the EMU. NBER Working Paper, No. 5838.
Judson, R. A. – Owen, A. L. (1999): Estimating Dynamic Panel Data Models: A Guide for Macroeconomists. Economic Letters, 65: 9–15.
Kaplanoglou, G. – Rapanos, V. T. (2011): The Greek Fiscal Crisis and the Role of Fiscal Governance. Greece – Hellenic Observatory Papers on Greece and Southeast Europe, No. 48, Hellenic Observatory European Institute – LSE.
Kell, M. (2001): An Assessment of Fiscal Rules in the United Kingdom. IMF Working Papers, No. 01/91.
Kennedy, S. – Robbins, J. – Delorme, F. (2001): The Role of Fiscal Rules in Determining Fiscal Performance. In: Fiscal Rules. Papers presented at the Bank of Italy Workshop, Perugia, 1–3 February 2001, pp. 237–266.
Kirsanova, T. – Satchi, M. – Vines, D. – Wren-Lewis, S. (2007): Optimal Fiscal Policy Rules in a Monetary Union. Journal of Money, Credit and Banking (Blackwell Publishing), 39(7): 1759–1784.
Kopits, G. (2001): Fiscal Rules: Useful Policy Framework or Unnecessary Ornament? IMF Working Paper, No. 01/145.
Kopits, G. – Symansky, S. (1998): Fiscal Policy Rules. IMF Occasional Paper, No. 162.
Mihályi, P. (2011): The 2011 Governance Reform of the Eurozone: Two Well-Known Problems of the Centrally Planned Economies (An Essay). Acta Oeconomica, 61(3): 281–291.
Nickell, S. (1981): Biases in Dynamic Models with Fixed Effects. Econometrica, 49: 1417–1426.
OECD (2013): Fiscal Federalism 2014 Making Decentralisation Work. OECD Publishing.
Poterba, J. M. (1994): State Responses to Fiscal Crises: The Effects of Budgetary Institutions and Politics. Journal of Political Economy, 102(4): 799–821.
Schmitt-Grohe, S. – Uribe, M. (2007): Optimal Simple and Implementable Monetary and Fiscal Rules. Journal of Monetary Economics, 54(6): 1702–1725.
Schuknecht, L. (2004): EU Fiscal Rules. Issues and Lessons from Political Economy. ECB Working Paper, No. 421.
Turrini, A. (2008): Fiscal Policy and the Cycle in the Euro Area: The Role of Government Revenue and Expenditure. European Economy – Economic Papers, No. 323.
Wierts, P. (2008a): How do Expenditure Rules Affect Fiscal Behaviour? De Nederlandsche Bank (DNB) Working Paper, No. 166.
Wierts, P. (2008b): Fiscal Rules and Fiscal Outcomes in EMU. Theory and Evidence. Ph.D. Thesis, The Centre for Euro-Asian Studies, Department of Economics.
Windmeijer, F. (2005): A Finite Sample Correction for the Variance of Linear Efficient Two-Step GMM Estimators. Journal of Econometrics, 126(1): 25–51.
Wyplosz, Ch. (2002): Fiscal Policy: Institutions versus Rules. CEPR Discussion Papers, No. 3238.
Wyplosz, Ch. (2012): Fiscal Rules: Theoretical Issues and Historical Experiences. NBER Working Papers, No. 17884.