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



Table 11: Budget balances and structural reforms: results from the estimation of fiscal rules (sample defined
in such a way that there are no missing observations for any of the reform dummies)

Dependent variable:
primary CAB

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Explanatory variables

Constant

-2.2***

-2.2***

-2.58***

-2.67***

-2.35***

-2.39***

-2.62***

-2.57***

(-3.65)

(-3.65)

(-4.14)

(-4.26

(-3.78)

(-4.01)

(-4.12)

(-4.14)

Lagged     dependent

0.75***

0.76***

0.75***

0.74***

0.76***

0.75***

0.77***

0.75***

variable

(16.26)

(16.58)

(16.66)

(16.02)

(16.6)

(16.79)

(16.99)

(16.68)

Output gap

0.019

0.006

0.018

0.034

0.012

0.022

0.005

0.016

(0.42)

(0.14)

(0.41)

(0.73)

(0.28)

(0.5)

(0.13)

(0.36)

Lagged debt/GDP ratio

0.044***

0.043***

0.051***

0.055***

0.04***

0.047***

0.05***

0.049***

(4.73)

(4.6)

(5.18)

(5.33)

(4.71)

(5.19)

(5.04)

(5.16)

Dummy labour market

-0.26

-0.34

reforms

(-1.18)

(-1.55)

Dummy product market

-0.12

0.01

reforms

(-0.56)

(0.05)

Dummy      pension

-0.49**

-0.54**

reforms

Interaction      labour

(-2.26)

(-2.39)

-0.24

market/product
market reforms

(-1.1)

Interaction      labour

-0.68***

market/pension reforms

Interaction product

(-2.74)

-0.37*

market/pension
market reforms

(-1.68)

Interaction      labour

-0.65**

market/product

market/pension reforms

(-2.38)

N. obs.

188

188

188

188

188

188

188

188

R sq.

0.65

0.65

0.65

0.66

0.65

0.66

0.66

0.66

Chi sq

853

848

875

878

853

941

908

879

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.

The pension reform dummy is constructed as an indicator taking value 1 if a pension reform was carried out in the current or
previous year and zero otherwise.

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

129



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