This paper evaluates the cyclicality, inertia and effect of EU accession on fiscal policy in Central and Eastern Europe using a real time dataset. Budget balances are found to react in a stabilising way to economic activity, and they are less inert than is typically found in Western Europe. There is clear evidence of a fiscal loosening in the run-up to EU accession. This began in 1999 in larger central European countries, often identified as “front-runners”. The other seven began loosening in 2001, after the Nice Treaty had been agreed and their EU entry confirmed. For both sets of countries, this loosening cumulatively amounts to some 3% of GDP. Keywords: Central and Eastern Europe, Fiscal Policy, Real Time Data, EU Accession. JEL Classification: E62 (Fiscal Policy), H6, (National Budget), E61 (Policy Objectives, Policy Designs and Consistency).
214 - Fiscal policy in Central and Eastern Europe with real time data: Cyclicality, inertia and the role of EU accession
- DNB Working Papers
Date 27 July 2009