Fiscal policy stance in the European Union
by Maria Teresa Medeiros Garcia; Pedro David Torres Coelho
International Journal of Public Policy (IJPP), Vol. 16, No. 1, 2021

Abstract: The objective of the paper is to study the relationship between the fiscal policy stance and the four variables of fiscal rules, government decentralisation, financial stress, and the electoral calendar in 28 member countries of the European Union, covering the period from 1990 to 2017. Although these relationships have been considered in the literature, there is no finding concerning these four variables simultaneously, neither for this number of countries, nor this particular time-period. Using ordinary least squares and the two-stage least squares estimators for an unbalanced panel dataset, as well as three fiscal policy stance indicators (primary balance, primary expenditure, and cyclically adjusted primary balance), the findings suggest a negative relationship between the fiscal policy stance and the level of taxation decentralisation. Furthermore, the results indicate that in years characterised by increased financial stress, the indicators of fiscal policy stance deteriorated and no statistically-significant relationships exist between budgetary outcomes, fiscal rules, and the electoral calendar, respectively.

Online publication date: Thu, 07-Apr-2022

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