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on Public Finance |
| By: | Luca Agnello (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Ricardo M. Sousa (University of Minho, Department of Economics and Economic Policies Research Unit (NIPE), Campus of Gualtar, 4710-057 - Braga, Portugal.) |
| Abstract: | This paper empirically analyzes the political, institutional and economic sources of public deficit volatility. Using the system-GMM estimator for linear dynamic panel data models and a sample of 125 countries analyzed from 1980 to 2006, we show that higher public deficit volatility is typically associated with higher levels of political instability and less democracy. In addition, public deficit volatility tends to be magnified for small countries, in the outcome of hyper-inflation episodes and for countries with a high degree of openness. JEL Classification: E31, E63. |
| Keywords: | Public deficit, volatility, political instability, institutions. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901042&r=pub |
| By: | Beetsma, Roel; Giuliodori, Massimo; Wierts, Peter |
| Abstract: | Using real-time data from Europe's Stability and Convergence Programs, we explore how fiscal plans and their implementation in the EU are determined. We find that (1) implemented budgetary adjustment falls systematically short of planned adjustment and this shortfall increases with the projection horizon, (2) variability in the eventual fiscal outcomes is dominated by the implementation errors, (3) there is a limited role for "traditional" political variables, (4) stock-flow adjustments are more important when plans are more ambitious, and (5), most importantly, both the ambition in fiscal plans and their implementation benefit from stronger national fiscal institutions. We emphasise also the importance of credible plans for the eventual fiscal outcomes. |
| Keywords: | EU; Fiscal policy; fiscal rules; implementation; medium-term budgetary framework; planning; real-time data |
| JEL: | E62 H60 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7285&r=pub |