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The Impact of Fiscal Rules on Public Finances: Theory and Empirical Evidence for the Euro AreaWim MarneffeHasselt University - Faculty of Applied Ecoonomics Bas Van AarleKU Leuven - LICOS - Centrum voor Transitie-economie; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Radboud University Nijmegen - Department of Economics Wouter Van Der WielenHasselt University - Faculty of Applied Ecoonomics Lode VereeckHasselt University - Faculty of Applied Ecoonomics December 30, 2010 CESifo Working Paper Series No. 3303 Abstract: This paper presents a review of the most significant fiscal rules policymakers can choose from. The insights from this review are then applied to the current budgetary situation of the European Union. In the European Union, the supranational Stability and Growth Pact (SGP) should provide the necessary guidance in limiting governmental borrowing by member states. In addition to the SGP, European countries are implementing various other fiscal rules that bind central, regional and local governments. We provide empirical estimates of the effect of fiscal rules on fiscal balance, government spending and government revenues, using a Fiscal Rule Index. We find that fiscal rules have some effect on fiscal balances.
Number of Pages in PDF File: 26 Keywords: euro area, fiscal policy, policy rules, fiscal sustainability JEL Classification: F31, F41, G15 working papers seriesDate posted: January 18, 2011Suggested CitationContact Information
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