Government debt, European Institutions and fiscal rules: a synthetic control approach

Abstract

AbstractPublic debt and its development are key questions of public sector economics and fiscal policy. This paper uses the Synthetic Control Method to study how different large-scale steps of European integration and the establishment of the EU fiscal framework have affected government debt in EU Member States. The results point to a notable debt-restricting effect of EU membership and the introduction of the Stability and Growth Pact for a large majority of the studied country groupings as well as for individual countries. Outside of a few individual countries, the actual government debt levels are substantially lower than in the synthetic alternatives.