Economies (Jul 2022)

Is EU Fiscal Governance Effective? A Case Study for the Period 1999–2019

  • Panagiotis Liargovas,
  • Vasilis Pilichos

DOI
https://doi.org/10.3390/economies10080187
Journal volume & issue
Vol. 10, no. 8
p. 187

Abstract

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This paper examines the factors that influence the effectiveness of fiscal governance in the EU through a panel of 19 Eurozone countries for the period 1999–2019 using an OLS method. The results show the positive effects of economic growth, inflation and the change in the general government balance on the fiscal forecast error. Furthermore, the fiscal forecast error is negatively affected by the level of public debt and by elections. Fiscal transparency is integrated into the analysis through independent financial institutions, which positively influence the general government balance forecast error. Finally, Economic Adjustment Programs have a positive effect on the fiscal forecast error, thus improving the efficiency of fiscal governance. This paper suggests that independent budgetary institutions, such as fiscal councils, and the delegation of further responsibilities to them increase countries’ sustainability of public finances.

Keywords