FISCAL ACTIVISM IN EUROPEAN REGIONS: EVIDENCE ON FISCAL RULES BEFORE AND AFTER THE EURO

Georgios KARRAS
Department of Economics, University of Illinois at Chicago,
601 S. Morgan St., Chicago, IL 60607 7121
gkarras@uic.edu

Abstract
The introduction of the euro has been followed by noticeable fiscal divergence between the core and the periphery economies. This paper investigates the basic properties of fiscal policy in Europe and asks whether these properties are affected by euro membership. The empirical findings suggest that fiscal policy has been decisively countercyclical and generally sustainable. Adopting the euro raises the average country member’s primary deficit by about 0.5% of GDP within a year and the effect accumulates to 1.76% of GDP ten years later, but these dynamic responses are far more pronounced in the periphery economies than in the core.

read more

THE REGIONAL BORDER EFFECT IN SPAIN

Luis LANASPA SANTOLARIA
Department of Economic Analysis, University of Zaragoza.
llanas@unizar.es

Irene OLLOQUI CUARTERO
Department of Economic Analysis, University of Zaragoza.

Fernando SANZ GRACIA
Department of Economic Analysis, University of Zaragoza.

Abstract
This work is an empirical study of the Spanish Autonomous Communities from 2000 to 2010 to quantify the so-called border effect, or in other words, how much more intense are flows of goods between regions and the rest of Spain than between these regions and other countries. For this, we use the gravity equation model of trade. The main conclusions are: One, the border effect exists: the dummy variable which quantifies it is always positive and statistically different from zero. Two, the border effect tends to diminish over time. Three, estimating all the regions together, the border effect is around a factor of 10.5. Four, estimating each Autonomous Community independently, the greatest border effect is found in the Canary Islands (factor of 58.36) and the Balearic Islands (factor of 29.81); meanwhile, the regions with the least border effect are the ones with the two largest cities in the country: Catalonia (factor of 8.11) and Madrid (5.17), with Aragon in third place (8.14). Five, if we distinguish between regions’ imports and exports, the border effect is significantly higher for the former (factor of nearly 17, compared to one of nearly 10).

read more

CONVERGENCE REVISITED: CASE OF EU AND EASTERN EUROPE

Olcay ÇOLAK
Uşak University, Faculty of Economics and Administrative Sciences, Department of Economics, 1 Eylul Kampusu, 64100/Uşak-TURKEY
olcaycolak10@yahoo.com

Abstract
This paper aims to analyze the convergence pattern of the Central and Eastern European (CEE) and South Eastern European (SEE) to the developed older member countries of European Union. In this context, by performing panel data analysis to 33 countries and each subgroup between 1993 and 2012, results reveal that there is a strong tendency on convergence for the new entrants of European Union after 2004 and for the candidate countries in terms of both convergence types which confirm the findings of neoclassical paradigm states that poorer countries will grow faster than richer ones. The speed of β convergence varies between 1.3 % to 4.2 for each group and the findings suggest that private domestic investment is the most leading determinant of growth and convergence process of Eastern European countries.

read more