Working Paper BETA #2019-40

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Title : National Fiscal Rules Adoption and Fiscal Discipline in the European Union

Author(s) : Amelie BARBIER-GAUCHARD, Kea BARET, Alexandru MINEA

Abstract : Motivated by the fiscal imbalances in the EU countries in the recent period, this paper analyzes the effect of national fiscal rules adoption on fiscal discipline. Using a careful definition of national fiscal rules combined with a novel measure of fiscal discipline (the Global Financial Performance Index—GFPI), propensity score matching estimations that account for potential endogeneity reveal that fiscal rules significantly improve the GFPI. However, this favorable effect dramatically depends upon the type of fiscal rule and different structural factors. These two features, together with alternative measures of fiscal discipline, are found to be key ingredients that should be taken into account when assessing the effects of fiscal rules on fiscal discipline.

Key-words : Fiscal Discipline; National Fiscal Rules; Propensity Score Matching.

JEL Classification : H11, H61, H62.