The Role of Fiscal Rules for Spending Multipliers in European Union Countries

Abstract

"This paper focuses on the role of fiscal rules in shaping the macroeconomic effects of fiscal policy. We compare the fiscal multipliers across the European Union members and search for the drivers of their heterogeneity. To this aim we apply interacted panel vector autoregressive models to data from 27 EU countries over the period 1999-2022. Our results show that government spending multipliers are higher for countries with a relatively higher fiscal rule index compared to those with a lower index.