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<p>Through fiscal reaction functions, we investigate fiscal sustainability for five European country-group panels and check for a change in fiscal behaviour after countries adopted the euro as their currency. Using annual data for the period between 1990 and 2021, we identify evidence of average compliance with sustainability restrictions among Eurozone nations. However, for the Eurozone countries there is a smaller response, 0.046 percentage points (pp), to an increase in the debt ratio than in the case of the European economies without euro, where the response is around 0.104&#xa0;pp. Conversely, the euro membership has decreased the average responsiveness of primary balances to debt shocks as compared to the period before the implementation of the euro and the Eurozone core countries show a lower fiscal adjustment compared to periphery nations.</p>

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Compliance with fiscal sustainability and the euro

  • 期刊论文

  • 出版模式：

    开放获取

  • 发表日期：

    2026年3月10日

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  • António Afonso,
  • Catarina Farinha Miranda

摘要

Through fiscal reaction functions, we investigate fiscal sustainability for five European country-group panels and check for a change in fiscal behaviour after countries adopted the euro as their currency. Using annual data for the period between 1990 and 2021, we identify evidence of average compliance with sustainability restrictions among Eurozone nations. However, for the Eurozone countries there is a smaller response, 0.046 percentage points (pp), to an increase in the debt ratio than in the case of the European economies without euro, where the response is around 0.104 pp. Conversely, the euro membership has decreased the average responsiveness of primary balances to debt shocks as compared to the period before the implementation of the euro and the Eurozone core countries show a lower fiscal adjustment compared to periphery nations.