PUB - Publikationen an der Universität Bielefeld

This paper studies fiscal policy behavior with regard to sustainability for the group of the eight eastern new member states (NMS) which joined the European Union (EU) in 2004. Using the approach of Bohn (1995, 1998) the fiscal reaction function is estimated for the years 1996 until 2013. Further, separating the response in periods before and after accession studies potential changes in fiscal sustainability. The results of the panel regressions reveal a positive statistically significant reaction coefficient, indicating sustainable behavior. Moreover, the separated responses before and after 2004 signify a stronger reaction ahead of the accession. These results are also affected by the current debt crisis.