Planning to Cheat: EU Fiscal Policy in Real Time

52 Pages Posted: 8 Oct 2009  

Roel M. W. J. Beetsma

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA); Netspar

Massimo Giuliodori

University of Amsterdam - Faculty of Economics & Econometrics (FEE); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Peter Wierts

De Nederlandsche Bank; VU University Amsterdam

Abstract

Using real-time data from Europe’s Stability and Convergence Programs, we explore how fiscal plans and their implementation in the EU are determined. We find that (1) implemented budgetary adjustment falls systematically short of planned adjustment and this shortfall increases with the projection horizon, (2) variability in the eventual fiscal outcomes is dominated by the implementation errors, (3) there is a limited role for ‘traditional’ political variables, (4) stock-flow adjustments are more important when plans are more ambitious, and (5), most importantly, both the ambition in fiscal plans and their implementation benefit from stronger national fiscal institutions. We emphasize also the importance of credible plans for the eventual fiscal outcomes.

Suggested Citation

Beetsma, Roel M. W. J. and Giuliodori, Massimo and Wierts, Peter, Planning to Cheat: EU Fiscal Policy in Real Time. Economic Policy, Vol. 24, Issue 60, pp. 753-804, October 2009. Available at SSRN: https://ssrn.com/abstract=1484276 or http://dx.doi.org/10.1111/j.1468-0327.2009.00230.x

Roel M. W. J. Beetsma (Contact Author)

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

Roetersstraat 11
Amsterdam
Netherlands
+31 20 525 5280 (Phone)
+31 20 525 4254 (Fax)

Centre for Economic Policy Research (CEPR)

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London, EC1V 3PZ
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Massimo Giuliodori

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Peter Wierts

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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