NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Fiscal Policy and Monetary Integration in Europe

Jordi Gali, Roberto Perotti

NBER Working Paper No. 9773
Issued in June 2003
NBER Program(s):   EFG   ME   PE

A popular view among economists, policymakers, and the media, is that the Maastricht Treaty and then Stability and Growth Pact have significantly impaired the ability of EU governments to conduct a stabilizing fiscal policy and to provide an adequate level of public infrastructure. In this paper, we investigate this view by estimating fiscal rules for the discretionary budget deficit over the period 1980-2002, using data on EMU countries and control groups of non-EMU EU countries and other non-EU OECD countries. We do not find much support for this view. In fact, we find that discretionary fiscal policy in EMU countries has become more countercyclical over time, following what appears to be a trend that affects other industrialized countries as well. Similarly, we find that the decline in public investment experienced over the last decade by EMU countries is part of a world-wide trend that started well before the Maastricht Treaty was signed.

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Document Object Identifier (DOI): 10.3386/w9773

Published: Gali, Jordi and Roberto Perotti. "Fiscal Policy And Monetary Integration In Europe," Economic Policy, 2003, v18(37,Oct), 533-572. citation courtesy of

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