Fiscal Policies and Business Cycles in an Enlarged Euro Area

33 Pages Posted: 7 Mar 2007

See all articles by Karsten Staehr

Karsten Staehr

Tallinn University of Technology (TUT) - Department of Finance and Economics; Bank of Estonia

Date Written: February 2007

Abstract

This paper compares the cyclical properties of fiscal policies across the 12 original eurozone countries and the future members from Central and Eastern Europe. For the sample period 1995-2005, the fiscal balance exhibits less inertia and is more counter-cyclical in Central and Eastern European countries than in members of the eurozone. The main differences arise from the revenue side. Differences in the formation of fiscal policy between current and future eurozone countries decrease over time. Autonomous fiscal policy has little or no effect on cyclical variability in either of the two groups of countries. Counter-cyclical fiscal policy appears to be effective in Central and Eastern European countries, but largely ineffective in eurozone countries.

Keywords: fiscal policy determinants, fiscal policy effects, eurozone expansion

JEL Classification: E62, E63, E32

Suggested Citation

Staehr, Karsten, Fiscal Policies and Business Cycles in an Enlarged Euro Area (February 2007). CESifo Working Paper Series No. 1933, Available at SSRN: https://ssrn.com/abstract=968619

Karsten Staehr (Contact Author)

Tallinn University of Technology (TUT) - Department of Finance and Economics ( email )

Akadeemia tee 3-486
Tallinn, 12618
Estonia

HOME PAGE: http://www.ttu.ee/karsten-staehr

Bank of Estonia ( email )

Estonia Building 13
Tallinn, 15095
Estonia

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