214 - Fiscal policy in Central and Eastern Europe with real time data: Cyclicality, inertia and the role of EU accession

DNB Working Papers
Publicatiedatum 27 juli 2009

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).