Abstract
Abstract
This paper examines the relationship between fiscal rules and output volatility using annual panel data for the 27 European Union member states over the period 2000–2023. We find a positive and statistically significant association between the presence of expenditure rules, budget balance rules and debt rules and output volatility. This relationship remains robust across a series of tests. These findings suggest that numerical fiscal constraints may narrow the space available for countercyclical stabilization, and that the flexibility provisions of the reformed EU fiscal framework — escape clauses, cyclically adjusted targets and investment carve-outs — are important mechanisms through which fiscal credibility and output stability can be balanced.
JEL Classification: E62, E32, H60, C23