Do Fiscal Rules Foster Fiscal Discipline in the EU? Reassessing Evidence Using Novel Instruments

L. McLaughlin, P. Claeys

Journal of Economics and Statistics

Summary:

The Stability and Growth Pact has proven to be a steady pillar of EMU architecture, yet has not shifted public preferences for fiscal discipline. Violations of the Pact are recurrent, and the renegotiation of its rules is unremitting. This study re-examines the impact of fiscal rules in EU countries on fiscal prudence using IV and dynamic CCE panels with two novel instruments based on countries’ moral hierarchies. We also correct for common correlated effects on the panel of 27 EU member states from 1990 to 2023. The main robust result is that stronger fiscal rules do not enhance fiscal prudence, and at best do so only in a few EU countries.

Spanish layman's summary:

¿Hacen las reglas fiscales de la UE más prudentes a los gobiernos? Con instrumentos basados en valores morales (solidaridad con refugiados, cumplimiento de normas UE), un estudio de 27 países (1990–2023) concluye que reglas fiscales más duras mejoraron las cuentas en algunos países.

English layman's summary:

Do EU fiscal rules make governments more prudent? Using new instruments based on societies' moral values (refugee solidarity, compliance with EU law), this study of 27 EU countries (1990–2023) finds the disciplining impact of rules matters only in a few countries.

Keywords: fiscal policy; SGP; public debt; fiscal rules

JCR-JIF Impact Factor and WoS quartile: 1,200 - Q3 (2025)

DOI reference: https://doi.org/10.1515/jbnst-2025-0067

In press: October 2026.

Citation:
L. McLaughlin, P. Claeys, "Do Fiscal Rules Foster Fiscal Discipline in the EU? Reassessing Evidence Using Novel Instruments", Journal of Economics and Statistics, doi: 10.1515/jbnst-2025-0067