Fiscal Indulgence in Central Europe : Loss of the External Anchor

In recent years, fiscal performance in Central Europe has steadily deteriorated, in contrast to the improvement in the Baltics. This paper explores the determinants of such differences among countries slated for EU accession. Regression estimates suggest that economic and institutional fundamentals do not provide a full explanation. An alternative explanation lies in the political economy of the accession process, and a game-theoretic model illustrates why a country with a stronger bargaining position might have an incentive to deviate from convergence to the Maastricht criteria. The model generates alternative fiscal policy regimes-allowing for regime shifts-depending on country characteristics and EU policies.
Publication date: April 2004
ISBN: 9781451848311
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Economics- Macroeconomics , Economics- Macroeconomics , Poverty and Homelessness , Poverty and Homelessness , EU economic and monetary union , game-theoretic approach , fiscal performance , fiscal stance , loose ? fiscal policy , fiscal behavior , National Budget , Deficit , and Debt: General , Game Theory and Bargaining Theory: General , game theoretic approach

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