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

20 Pages Posted: 25 Jan 2007

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)

George Kopits

International Monetary Fund (IMF)

István P. Székely

European Commission, DGECFIN; Corvinus University of Budapest

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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 on the path to European Union (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 regimes - allowing for regime shifts - depending on country characteristics and EU policies.

Suggested Citation

Berger, Helge and Kopits, George and Szekely, Istvan P., Fiscal Indulgence in Central Europe: Loss of the External Anchor?. Scottish Journal of Political Economy, Vol. 54, No. 1, pp. 116-135, February 2007. Available at SSRN: https://ssrn.com/abstract=959288 or http://dx.doi.org/10.1111/j.1467-9485.2007.00407.x

Helge Berger (Contact Author)

Free University Berlin - Department of Economics ( email )

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HOME PAGE: http://www.wiwiss.fu-berlin.de/berger/eng_index.htm

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

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George Kopits

International Monetary Fund (IMF) ( email )

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Istvan P. Szekely

European Commission, DGECFIN ( email )

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Belgium
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Corvinus University of Budapest ( email )

Budapest
Hungary

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

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