NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Euro and Fiscal Policy

Antonio Fatas, Ilian Mihov

NBER Working Paper No. 14722
Issued in February 2009
NBER Program(s):   ME   PE

The paper provides and empirical characterization of fiscal policy in the euro area and in a group of twenty-two OECD economies over the period from 1970 until 2007. Using the cyclically-adjusted fiscal balance we document that policy in the euro area has been mildly pro-cyclical. The adoption of the common currency and the constraints imposed by the Stability and Growth Pact have not had a large impact on the cyclical behavior of the structural balance. In contrast, over the past ten years US fiscal policy has become highly countercyclical, which was due predominantly to discretionary changes in tax policies. However, the component of the budget due to automatic stabilizers reacts stronger in the euro-area countries than in the US. We also document the primary balance in the OECD economies is more sensitive to output growth rather than to the output gap, which calls into question the common practice of adjusting structural balances by using elasticities with respect to the output gap.

download in pdf format
   (255 K)

email paper

This paper is available as PDF (255 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14722

Published: The Euro and Fiscal Policy, Antonio Fatás, Ilian Mihov. in Europe and the Euro, Alesina and Giavazzi. 2010

Users who downloaded this paper also downloaded these:
Bordo, Markiewicz, and Jonung w17380 A Fiscal Union for the Euro: Some Lessons from History
Fatás and Mihov The Euro and Fiscal Policy
Gali and Perotti w9773 Fiscal Policy and Monetary Integration in Europe
Eichengreen w13393 The Breakup of the Euro Area
Alesina and Ardagna w15438 Large Changes in Fiscal Policy: Taxes Versus Spending
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us