Procyclicality of fiscal policy in European Union countries

By Bram Gootjes, Jakob de Haan. 2020

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Abstract Using real-time data, we examine whether fiscal policy has been counter- or procyclical in a panel of 27 European Union (EU) member states over the period 2000–2015. We also investigate whether fiscal rules and government efficiency improve the cyclical reaction of fiscal policy. Our results suggest that even though fiscal plans in EU countries have an acyclical stance, budgetary outcomes are procyclical. Government efficiency and fiscal rules seem to reduce fiscal procyclicality. Further analysis also reveals that fiscal policy seems to be more procyclical in non-euro area countries and in times of economic prosperity.

Subfields: Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/c17855256ac0ca9e2abf944e2b8fc3010a9e29ea