Beyond the SGP – Features and Effects of EU National-Level Fiscal Rules

52 Pages Posted: 14 Feb 2012

See all articles by Joaquim Ayuso-i-Casals

Joaquim Ayuso-i-Casals

European Union - European Commission

Diana González Hernández

European Union - European Commission

Laurent Moulin

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN)

Alessandro Turrini

European Commission; Centre for Economic Policy Research (CEPR)

Date Written: March 29, 2007

Abstract

The paper provides a comprehensive overview of the numerical fiscal rules in force in the 25 countries of the European Union, examines the reasons for the growing appetite for such rules, and assesses whether they have an influence on budgetary developments. The analysis is based on a new dataset constructed from questionnaires submitted to experts in finance ministries of EU countries which report a large amount of information on the numerical fiscal rules in force in the EU countries over the 1990-2005 period. The paper shows that the number of fiscal rules in force in the EU countries has increased in the past decades. The introduction of the Maastricht Treaty and of the SGP seem to have been catalysts for the introduction of fiscal rules. The analysis, based on the estimation of augmented fiscal reaction functions, confirms the existence of a relation between numerical fiscal rules and budgetary developments. The results show that some dimensions matter particularly for the capacity of fiscal rules to influence fiscal policy. Notably, the share of government finances covered by rules and the presence of strong enforcement mechanisms seem to be particularly relevant. The analysis also shows that there is a link between the design of numerical fiscal rules and the stabilisation function of fiscal policy. These findings confirm that while numerical fiscal rules can be useful devices to ensure better policies, careful attention should be devoted to the way they are designed.

Keywords: numerical fiscal rules, Stability and Growth Pact, cyclical stabilisation

JEL Classification: E62, H50, H62

Suggested Citation

Ayuso-i-Casals, Joaquim and González Hernández, Diana and Moulin, Laurent and Turrini, Alessandro, Beyond the SGP – Features and Effects of EU National-Level Fiscal Rules (March 29, 2007). Available at SSRN: https://ssrn.com/abstract=2004450 or http://dx.doi.org/10.2139/ssrn.2004450

Joaquim Ayuso-i-Casals (Contact Author)

European Union - European Commission

Rue de la Loi 200
Brussels, B-1049
Belgium

Diana González Hernández

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Laurent Moulin

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN) ( email )

BU-1 05/190
Brussels, Bruxelles B-1049
Belgium

Alessandro Turrini

European Commission ( email )

Office BU-10/113
B-1049 Brussels
Belgium
+32 2 299 5072 (Phone)
+32 2 299 3505 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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