Fiscal Indulgence in Central Europe: Loss of the External Anchor?

23 Pages Posted: 15 Feb 2006

See all articles by Helge Berger

Helge Berger

Free University Berlin - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

István P. Székely

European Commission, DGECFIN; Corvinus University of Budapest

Multiple version iconThere are 2 versions of this paper

Date Written: April 2004

Abstract

In recent years, fiscal performance in Central Europe has steadily deteriorated, in contrast to the improvement in the Baltics. This paper explores the determinants of such differences among countries slated for EU accession. Regression estimates suggest that economic and institutional fundamentals do not provide a full explanation. An alternative explanation lies in the political economy of the accession process, and a game-theoretic model illustrates why a country with a stronger bargaining position might have an incentive to deviate from convergence to the Maastricht criteria. The model generates alternative fiscal policy regimesallowing for regime shiftsdepending on country characteristics and EU policies.

Keywords: Fiscal policy, EU economic and monetary union, game-theoretic approach

JEL Classification: H6, C70

Suggested Citation

Berger, Helge and Szekely, Istvan P., Fiscal Indulgence in Central Europe: Loss of the External Anchor? (April 2004). IMF Working Paper, Vol. , pp. 1-23, 2004. Available at SSRN: https://ssrn.com/abstract=878885

Helge Berger (Contact Author)

Free University Berlin - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

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Istvan P. Szekely

European Commission, DGECFIN ( email )

CHAR 15/216
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Belgium
+3222958674 (Phone)

Corvinus University of Budapest ( email )

Budapest
Hungary

HOME PAGE: http://www.uni-corvinus.hu/index.php?id=22061

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