Fiscal (ir)responsibility of EU countries

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JEL classification

• Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• Fiscal Policy
• Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

Keywords

Budget balance, business cycle, fiscal responsibility, regression analysis

Abstract

This paper examines dependence of public budget balance on business cycle and the budget balance persistence, using data of 22 countries of EU. Results suggest that adopted regression can explain the behavior of state budget balance in the most examined countries and the best data fit is in the countries with long tradition of market economy. For those countries where was our regression statistically significant we examined their fiscal responsibility. Results suggest that the most responsible fiscal policy in the last 14 years was made by Finland, Denmark, Luxemburg and Sweden. Relatively responsible in fiscal policy was Estonia. Irresponsible in fiscal policy were Netherlands, Belgium, Ireland, Spain, Germany, Slovenia, Latvia, Italy, Great Britain, France, Czech Republic and Poland.