Empirical Evidencies For The Budget Deficits Co-Integration In The Old European Union Members: Are There Any Interlinkages In Fiscal Policies?

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Executive Summary

In the last years, the fiscal harmonization among the European Union members has become a pillar of economic integration and of fiscal and financial stability in the European area. The institutional changes, the semi-failure of the "Old" Stability and Growth Pact as well as the recent waves of enlargements all these were put a greater emphasis on this issue inducing a higher pressure for fiscal discipline. In this context, the objective of the paper is to examines recent empirical evidences for bilateral and multilateral integration between fiscal policies, as this are synthesised by budget deficits, of old European Union members in the framework of the Johansen cointegration procedure with a preliminary appliance of the principal component analysis.

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