The Divergence between the EU and non-EU Fiscal Councils

Bethlendi, András and Lentner, Csaba and Póra, András (2019) The Divergence between the EU and non-EU Fiscal Councils. In: European Financial Systems 2019, June 24-25, 2019, Brno, Czech Republic.

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Abstract

The European sovereign crisis that followed the 2008 crisis showed that rules-based fiscal policy is insufficient in itself in order to avoid fiscal alcoholism and excessive sovereign debt. Nevertheless, these policies have become more and more widespread in order to limit indebtedness. This article deals with one of the most important elements of rules-based systems: the fiscal council. The key question imposed was: is it mostly a European phenomenon, or rather a global standard? Is there a divergence between the EU and non-EU fiscal councils, or not? As a method, we employed descriptive statistics, then a hierarchical cluster analysis, based on the data of the IMF Fiscal Council Dataset. In conclusion, an EU and a non-EU cluster were formed, thus our working hypothesis was mostly underpinned. Our results have thus contributed to the literature and advanced the case that the increased number of fiscal councils can be attributed to European regulations or internal political issues rather than strengthening of fiscal prudency.

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