Does Eurozone Membership Strengthen the Significance of Fiscal Instruments?

This paper investigates the relationship between fiscal instruments (such asnumerical fiscal rules, independent fiscal institutions and medium-term bud-getary frameworks) and fiscal performance of EU countries. An empiricalanalysis using panel data estimation method reveals a statistically significantand positive impact of the use of fiscal instruments on the fiscal stance. Theresults obtained warrant the conclusion that the use of multiannual budgetaryframework has the strongest (among all fiscal instruments) impact on the bud-get balance. In addition, there is no clear evidence that an EU country’seurozone membership guarantees better fiscal performance and stronger fiscalinstruments. This conclusion also proves justified upon excluding the impact offiscal reform implemented in those EU member states that joined the eurozonein the period under analysis.