Fiscal cyclicality and EMU

► We examine the cyclical patterns in fiscal policy over the 1970-2007 period in EMU member countries. ► Insufficiently-countercyclical fiscal patterns in the pre-crisis years were certainly a contributory factor to the subsequent crisis. ► The conduct of fiscal policy improved in the wake of the Maastricht Treaty but deteriorated after the launch of the euro. ► The institutional environment can affect the conduct of fiscal policy. ► The financial cycle affects fiscal policy over and beyond the effect of the business cycle.