Essays on public finance

This thesis studies three empirical questions in public finance: how the EU fiscal rules shape fiscal policy, how pension system design affects macroeconomic volatility, and what determines long-term government bond interest rates. The second and third chapters examine whether the fiscal rules of the Maastricht Treaty and the Stability and Growth Pact changed fiscal policy in the EU, using fiscal response regressions. A special focus of the third chapter is on whether the EU countries' fiscal reaction to the 2007-2008 financial crisis differed from that of other OECD countries due to the constraints imposed by the fiscal rules. The fourth chapter analyses whether switching from a pay-as-you-go to a pre-funded pension system affects macroeconomic volatility, focusing on consumption and output volatility. The fifth chapter investigates the factors behind low interest rates using a panel cointegration model of 10-year government bond yields in developed economies.