The design of fiscal rules and forms of governance in European Union countries

Abstract:

This paper examines the development of fiscal rules and budget procedures in EU countries, and their impact on public finances since the mid-1980s. It presents a new data set on institutional reforms and their impact in Europe. Empirical patterns confirm our prediction that more stringent fiscal rules exist under large coalition governments, while the centralisation of budgetary procedures is the main form of fiscal governance elsewhere. In addition, the centralisation of procedures does not restrain public debt in countries more prone to a rules-based approach, whereas more stringent fiscal rules seem to support fiscal discipline in almost all EU countries.