Have Euro Area and EU Economic Governance Worked? Just the Facts

41 Pages Posted: 31 May 2011

See all articles by Demosthenes Ioannou

Demosthenes Ioannou

European Central Bank (ECB)

Livio Stracca

European Central Bank (ECB)

Date Written: May 19, 2011

Abstract

We test whether two key elements of the EU and Euro Area economic governance framework, the Stability and Growth Pact and the Lisbon Strategy, have had any impact on macroeconomic outcomes. We test this proposition using a difference-in-difference approach on a panel of over 30 countries, some of which are non-EU (control group). Hence, the impact of the EU economic governance pillars is evaluated based on both the performance before and after their application as well as against the control group. We find strong and robust evidence that neither the Stability and Growth Pact nor the Lisbon Strategy have had a significant beneficial impact on fiscal and economic performance outcomes. We conclude that a profound reform of these pillars is needed to make them work in the next decade.

Keywords: Stability and Growth Pact, Lisbon Strategy, Euro Area, European Union, governance, institutions

JEL Classification: E62, E63, H63, O43

Suggested Citation

Ioannou, Demosthenes and Stracca, Livio, Have Euro Area and EU Economic Governance Worked? Just the Facts (May 19, 2011). ECB Working Paper No. 1344, Available at SSRN: https://ssrn.com/abstract=1846328

Demosthenes Ioannou (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Livio Stracca

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

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