Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316863 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11749
Publisher: 
CESifo GmbH, Munich
Abstract: 
Through fiscal reaction functions, we investigate fiscal sustainability for five European country-group panels and check for a change in fiscal behaviour after countries adopted the euro as their currency. Using annual data for the period between 1990 and 2021, we identify evidence of average compliance with sustainability restrictions among Eurozone nations. However, for the Eurozone countries there is a smaller response, 0.046 percentage points (pp), to an increase in the debt ratio than in the case of the European economies without euro, where the response is around 0.1036 pp. Conversely, the euro membership has decreased the average responsiveness of primary balances to debt shocks as compared to the period before the implementation of the euro.
Subjects: 
fiscal sustainability
debt
primary budget balance
fiscal reaction functions
euro area
JEL: 
E62
H62
Document Type: 
Working Paper
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