Proceedings from the ECFIN Workshop "The budgetary implications of structural reforms" - Brussels, 2 December 2005



Table 7: Budget balances, labour and product market reforms: estimating fiscal rules (see table 1 for sample
definition)

Dependent variable:
primary CAB

Explanatory variables

(1)

(2)

Constant

-1.35***

-1.58***

(-5.49)

(-5.15)

Lagged dependent

0.75***

0.76***

variable

(23.74)

(23.71)

Output gap

-0.21

-0.06

(-0.48)

(-1.43)

Lagged debt/GDP ratio

0.032***

0.036***

(6.78)

(6.21)

Dummy for labour

-0.306*

market reforms

(-1.65)

Dummy for product

-0.29

market reforms

(-1.53)

N. obs.

342

293

R sq.

0.73

0.76

Chi sq

1121

1171

Notes: Estimations method: fixed effects, instrumental variables
regression. The output gap is instrumented with its own lag and the US
lagged output gap. All fiscal variables are expressed as shares on
potential output.

Z statistics are reported in parentheses. *, **, and *** denote,
respectively, significance at the 10, 5 and 1 per cent level.
Coefficients for country fixed effects are not reported.

Source: Authors’ calculation on data described in table 1 and DG ECFIN
AMECO database.

125



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