Type of Publication: | Working Paper/Technical Report |
URI (citable link): | http://nbn-resolving.de/urn:nbn:de:bsz:352-0-274735 |
Author: | Baskaran, Thushyanthan; Hessami, Zohal |
Year of publication: | 2013 |
Series: | Working Paper Series / Department of Economics ; 2013‐03 |
Summary: |
One possible explanation for the European sovereign debt crises is that the European Economic and Monetary Union (EMU) gave rise to consolidation fatigue or even deliberate over-borrowing. This paper explores the validity of this explanation by studying how three decisive stages in the history of the EMU affected public borrowing in EU member states: the signing of the Maastricht treaty in 1992, the introduction of the Euro in 1999, and the suspension of the SGP in late 2003. The methodology relies on difference-in-difference regressions covering 26 OECD countries over the 1975-2009 period. The findings indicate that the first two 'treatments' reduced deficits especially in traditional high-deficit countries. In contrast, the watering down of the original SGP encouraged borrowing in countries which traditionally have had high deficits.
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JEL Classification: | F15; F42; H62; H63 |
Subject (DDC): | 330 Economics |
Keywords: | EMU, monetary union, fiscal policy, public deficits |
Link to License: | In Copyright |
Bibliography of Konstanz: | Yes |
BASKARAN, Thushyanthan, Zohal HESSAMI, 2013. Monetary Integration, Soft Budget Constraints, and the EMU Sovereign Debt Crises
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