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Fiscal Indulgence in Central Europe: Loss of the External Anchor

Author/Editor: Berger, Helge | Kopits, George | Székely, István P.
Authorized for Distribution: April 1, 2004
Electronic Access: Free Full Text (PDF file size is 360KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: In recent years, fiscal performance in Central Europe has steadily deteriorated, in contrast to the improvement in the Baltics. This paper explores the determinants of such differences among countries slated for EU accession. Regression estimates suggest that economic and institutional fundamentals do not provide a full explanation. An alternative explanation lies in the political economy of the accession process, and a game-theoretic model illustrates why a country with a stronger bargaining position might have an incentive to deviate from convergence to the Maastricht criteria. The model generates alternative fiscal policy regimes-allowing for regime shifts-depending on country characteristics and EU policies.
 
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Series: Working Paper No. 04/62
Subject(s): Fiscal policy | Europe | European Union | European Economic and Monetary Union | Fiscal reforms | Budget deficits | Economic models
Author's keyword(s): Fiscal policy | EU economic and monetary union | game theoretic approach
 
English  
    Published:   April 1, 2004        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA0622004   Pages:   22
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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