Panoeconomicus is an economic quarterly with a general orientation. We publish original scientific papers, scientific reviews, preliminary reports, conference papers, professional papers, polemics and book reviews.
Rethinking Economic Liberalization: A Progressive Approach to Reform by Jonah D. Levy Edward Elgar Publishing, 2025.
The Redistribution of Freedom: Normative Analysis of the Universal Basic Income
Given the rapid structural changes that our societies are experiencing, there is an urgent need to rethink our values and reformulate the social contract. The Universal Basic Income (UBI) is gaining more relevance in academic and public debates as the best alternative for a necessary change. This paper presents an exhaustive evaluation of the UBI in its normative character with an assessment of its convenience according to different theories of social justice and concepts of freedom. It is argued that UBI can be a good tool to improve the freedom and well-being of individuals, but it is not exempt from criticism. The paper puts forward an original financing proposal through the creation of a Sovereign Wealth Fund and a new monetary policy design with the aim of minimizing these criticisms. JEL: H53, D63, I31
Understanding Political Economy, Capitalism, Democracy and Inequality by Bob Hancké, Toon Van Overbeke, and Dustin Voss Edward Elgar, 2025.
Pakistan’s Stock Market Reaction to Large and Small Shocks in Oil Prices: An Assessment with the MT-NARDL Model
This article empirically explores the impact of both small and large fluctuations in the crude oil prices on Pakistan’s stock market utilizing the multiple threshold non-linear autoregressive and distributed lag model from 1997–2021. The empirical results demonstrate that larger shocks to the prices of crude oil have a significant negative impact on Pakistan’s stock market. However, small shocks to the prices of crude oil positively stimulate its activity. Pakistan’s stock market is heavily and asymmetrically impacted by the United States’ stock market: positive shocks, reflected in the Standard & Poor’s 500, have a positive impact on Pakistan’s stock market, while negative shocks have an adverse effect. All estimated coefficients are statistically significant. Pakistan’s stock market is also negatively affected by foreign direct investments (FDI) and exchange rates, but the inflow of remittances has a positive effect. Based on empirical findings, the article recommends that policymakers in both the private and public sectors should estimate the expected fluctuations in the prices of crude oil, FDI, remittance inflows, and exchange rates when investing in the Pakistani stock market. JEL: G0, G1, G2
Non-linear autoregressive distributed lag
The Impact of Financial Access on Income Inequality: Evidence from Panel Data Estimation
As there are limited attempts made by previous studies, this paper examines the impacts of financial access on income inequality using a panel data of 52 developed and developing countries ranging from 2005 to 2020. Initially, the Financial Access Survey (FAS), launched in 2009 suggested that demographic and geographical data of bank branches and automated teller machine (ATM) able to reflect the accessibility of financial service and UN SDG also adopted the demographic data of bank branches and automated teller machine in the SDG target goal as an alternative to expand financial access and strengthen the capacity of domestic financial institution. To measure financial access effectively, indicators such as the number of bank branches and automated teller machines per thousand square feet and hundred thousand adults are employed in this paper to proxy financial access and examine its impact on income inequality. In addition, since the empirical model is largely unexplored, this paper aims to examine the issue thoroughly with secondary data that cover a broader duration and capture changes within the same observation over time. Dynamic panel system generalized method of moments (GMM) estimators is used and the empirical result grounded in real-world data could adopt the outputs, which disclose the relative strength of the influence of financial access on income inequality and identify whether access to finance is useful to narrow down income inequality. The conclusions are also critical for policy design as well. JEL: G20, E25, C33, D31
Paranoid Finance by Fabian Muniesa Polity Press, 2024.
The Oil Market and Macroeconomic Stability: What is the Role of Policy Uncertainty?
We analyse the fluctuating connection between economic policy uncertainty (EPU) and oil prices (OP) in Croatia through sub-sample rolling-window Granger causality analyses. Statistical inference based on Granger causality tests suggests that OP acts as a leading indicator for EPU, with evidence of bidirectional feedback. The negative influence of OP on EPU indicates that OP will affect the government’s economic policy stability and then affect EPU. Conversely, EPU exhibits both positive and detrimental effects on OP. These results align with general equilibrium models, highlighting the interdependence between OP and EPU. Given the increasing financial attributes of oil, gaining insight into the connection between OP and EPU is essential for enabling the government to formulate more effective economic policies to mitigate the impacts of fluctuations in OP. JEL: Q43, C32, E69, H3
Behavioural Responses to Taxes and Optimal Taxation of Top Labour Incomes in Croatia
We use a model of optimal labour income taxation and tax records data to determine the optimal marginal tax rate for top labour income earners in Croatia in the period 2014–2021. Behavioural responses to taxation through labour supply and tax evasion, captured by the elasticity of taxable income, are estimated based on several tax reforms. Responses through international migration are also considered. In 2021, for most combinations of the relevant parameters, the optimal top marginal rate of personal income tax is higher than the actual rate. Also, for most parameter combinations, the reductions in the top marginal rate over 2014–2021 cannot be justified from the optimal taxation perspective. Further reductions in the top rate can be justified for only a few parameter combinations. While the literature on the elasticity of taxable income and the optimal taxation of top earners was focused on Western Europe and the US, this paper contributes by considering a Southeast European country. JEL: H21, H31
Advanced AI Models for Future Forecasting of Budget Expenditures via Machine Learning and Deep Learning
This study builds on Türkiye’s long-standing challenges in managing public spending amid political and economic uncertainty. Budget planning plays a vital role in ensuring fiscal sustainability and economic resilience. Therefore, this study proposes a new forecasting framework that utilizes the latest artificial intelligence models. This paper aims to provide data-driven decision support to policymakers by improving the accuracy and robustness of expenditure forecasts under complex temporal dynamics. Accordingly, the use of machine learning and deep learning methods to forecast budget expenditures in Türkiye was proposed and analyzed. Comprehensive datasets extending from January 2008 to May 2024 was considered. Datasets also include various extraordinary periods such as the global financial crisis, the European debt crisis, various major political events in Türkiye, and the COVID-19 pandemic. Model performance was evaluated using the Time Fusion Transform, which has received praised for its superior performance even in complex and volatile time series. The model results show that the MAPE is 0.0658%, MAE is 0.0050%, RMSE is 0.0111%, and R² is 0.993%. The Random Search learning algorithm was implemented to determine the optimal hyperparameters that enable the model to work effectively on the data. According to the findings of the study, the model can perform well despite economic and political changes. Biodiversity in the use of all model types shows that machine learning and deep learning models also offer valuable insights into the budget forecasting process. JEL: C45, C53, C61, H68.
Industrial Policy and Export Productivity: Analysis by Company Size and Microregions
This study aimed to investigate the possible spatial relationship between resources granted by the Brazilian Development Bank (BNDES) disaggregated by company size and export productivity in Brazil’s micro-regions. The study period was between 2009 and 2020. Data showed that most BNDES resources earmarked for the manufacturing industry were concentrated in the South and Southeast, particularly in the microregions close to the main commercial centers. By contrast, a pattern of low intensity in financing and productivity was observed in the microregions located in the country’s central area. The econometric results indicate the spatial spillover effects of BNDES financing on microenterprise export productivity across various microregions. Additionally, network analysis revealed that the microregions with the highest export volumes were not in the main cluster, indicating that they mainly exported simple or low-productivity products. JEL: O47, L52, C31.
Unraveling the Causal Link Between Corruption and Happiness: Insights from Developing and Advanced Economies
In recent years, the concept of the corruption economy has gained significant prominence on the international agenda. Corruption generates numerous adverse effects, including reductions in tax revenues, the exacerbation of income inequality, and the misallocation and waste of public resources. The present study examines the causal relationship between perceptions of corruption and perceptions of happiness at the country level. For this purpose, the study applies panel Granger causality analysis to data from 81 countries for the period 2010–2023. After analysis of the full sample, countries are classified as developing or advanced economies based on the International Monetary Fund (IMF) classification. Causality tests are applied to both groups and are interpreted comparatively. After controlling for macroeconomic variables such as per capita economic growth, unemployment, and inflation, the results reveal a unidirectional causality from perceptions of corruption to perceptions of happiness at the global level. However, subgroup analyses indicate a bidirectional causality in developing economies and no significant causality in advanced economies. These findings underscore the critical role that the level of development plays in shaping the interaction between the perceptions of corruption and happiness. JEL: D73, I31, C23
The Comparative Analysis of the Economic Effects of Competition Law on the United States and China
As there are limited attempts made by previous studies in comparing the effects of antitrust law, this paper examines the economic impacts of competition law between the United States and China, focusing on the distinctive approaches adopted by both countries and the corresponding outcomes for their respective economies. The analysis highlights the key differences in enforcement priorities, methodologies and economic impact. To measure economic effect effectively, consumer price indexes are employed in this paper to investigate the influence of antitrust law on it. In addition, this paper applied a conceptual framework, rooted in existing theories and provided a solid foundation. The theoretical-based method allows the paper to describe the relationship between competition law enforcement and economic outcomes in both countries by highlighting how country-specific factors mediate enforcement effectiveness. The conclusions provided critical insights for policy design as well. JEL: E0, F0, K21, N1
Navigating the Moral Economy An Integrative Review
The concept of the moral economy is yet to reach semantic maturity. This article provides a fresh classification of works in the moral economy literature: the early and late classics, conceptual-historical reviewers, types of case studies, political uses, as well as calls for change in economics. The reopening of the economic to the ethical is looked at briefly, through philosophical and economic classics, as an illustrative scaffolding for the current context of the moral economy concept. The article then turns to specific moral economic directions within the field of economics: incorporating the environmental understanding, applying virtue ethics to economic entities, and obtaining an ethical understanding of human needs. I examine the question of whether the moral economy can embody moral economics, i.e., the incorporation of ethical elements into economic theory. Through presenting forces of both divergence and convergence, I argue for keeping the semantic connection between the moral economy and moral economics open. JEL: B29, D63, P40, Q59
Productivity, Growth and Labour Market Dynamics in Italy (1960-2023)
This article aims to examine the evolution of the Italian economy from the 1960s to the present focusing on wage and labour productivity dynamics. Throughout this period, the issue of containing labour costs emerged. On one hand, it provided a competitive advantage, but on the other exerted downward pressure on employment, aggregate demand, productivity, and economic growth. These contradictions and vulnerabilities began to emerge clearly since the 1980s with the intensification of the processes of economic tertiarization, international market integration and a general reduction in workers' bargaining power, further aggravated by the lack of policy manoeuvrability due to European constraints and austerity. Within a context characterized by small businesses, factors such as outsourcing, the adoption of a two-tier bargaining system, and increasing labour flexibility have been discouraging investments and productivity, thus locking Italy into a development model that risks further decline. JEL: E02, E24, N34, O40.
On the Robustness of Portfolio Diversification Benefits within MENA Stock Markets
This study aims to examine whether the benefits of diversification within MENA stock markets are robust to changes across volatility regimes over the weekly period spanning from January 2004 to March 2025. The methodology adopted in this paper is based on testing the stability of shock transmission mechanisms across markets in the presence of regime-switching volatility, using a bivariate Markov switching model. The findings show that, in general, intra-MENA market linkages are unstable, with little evidence of robust portfolio diversification benefits during turbulent periods. From the perspective of portfolio strategies, our results highlight differences in portfolio allocation depending on the volatility regime and the country group, due to their heterogeneous characteristics. These findings are of great interest to policymakers, who should consider short-term responses to prevent the spread of contagion during crisis periods. JEL: C32, F42, G15
The Impact of Economic and Institutional Factors on International Migration Flows: Evidence from Turkey
International migration affects the economy, culture, and social life of the destination country. Internal conflicts and wars within countries especially compel people to migrate. Turkey is exposed to a heavy influx of migration as one of the countries most affected by this situation. In this context, the study addresses six different migrant groups: those migrating from Turkey and those migrating to Turkey, those migrating from Turkey to Europe and Asia, and finally, those migrating from Europe and Asia to Turkey. The study investigates economic factors influencing migration together with institutional effects. The results showed that while economic factors are more influential on migration from Turkey to European countries, institutional factors are determinative in migration from Europe to Turkey, and income is the primary determinant in migration from Asia. It was concluded that to strengthen its migration policies, Turkey should pay attention to institutional structures in addition to economic factors. JEL: F22, O15.
Is the Action or Discourse of the Central Bank of the Republic of Türkiye More Effective on Expected Inflation?
This study examines the effects of central bank discourse (tone index), action (policy rate), and actual inflation on expected inflation for Türkiye using monthly data between 2020 and 2024 via the SVAR model. Empirical findings demonstrate that the tone index has a statistically significant negative effect on expected inflation for one month, while actual inflation has a statistically positive effect for two months. These results suggest that the CBRT’s discourse, rather than its action, has a greater impact on expected inflation in the short term. In addition, the findings indicate that actual inflation has a significant impact on expected inflation in the short run. JEL: C32, E52, E58
Women in Politics and Budget Deviations: Evidence from Croatian Cities
This paper examines whether the political representation of women influences budget deviations in local governments. Using a panel dataset of 128 Croatian cities from 2016 to 2021, we investigate the impact of female representation in city councils and among mayors on the accuracy of revenue and expenditure forecasts. Applying a dynamic panel model with system GMM estimation, we find a non-linear relationship: a low share of women is linked to more optimistic and less credible budgets, while surpassing a threshold – around 30% for revenues and 40% for expenditures – leads to more fiscally responsible planning. Specifically, cities with greater female representation tend to underestimate revenues and overestimate expenditures, reflecting stronger adherence to fiscal discipline and more cautious budgeting. No statistically significant effect is observed for female mayors. These findings support theories on gendered governance and suggest that increasing the share of women in decision-making roles may improve fiscal performance in local government. JEL: J16, H71, H72
Examining Driving Forces of Arms Production: Security Demand or Economic Needs—World’s Largest Defense Companies
Arms production differs from that of general products because it involves both government and market factors. The needs of various actors vary; therefore, arms production is driven by internal security demands and external economic needs. This study identifies the complex factors behind arms production using fuzzy-set qualitative comparative analysis (fsQCA) to examine the configurations influencing arms production among the 77 largest defense companies. The results indicate that economic needs alone are neither necessary nor sufficient conditions for arms production. Arms production primarily stems from a country’s security needs, including domestic government procurement and demand for arms imports. Furthermore, a country’s economic scale and R&D strength contribute to increased arms sales. JEL: L64, E2, F14, H56.
Fuzzy-set qualitative comparative analysis (fsQCA)
Do Remittances Affect Foreign Direct Investment? A Comprehensive Analysis of BRICS-T Nations
This study investigates the impact of remittances and the International Property Rights Index on foreign direct investment (FDI) in BRICS-T countries during the period from 2007 to 2023. FDI is employed as the dependent variable, while the independent variables comprise remittances, trade openness, financial development, government consumption, and the International Property Rights Index. The long-term results indicate that remittances exert a positive influence on FDI over the long run. However, contrary to expectations, the International Property Rights Index demonstrates a negative long-term effect on FDI. Although sound governance and strong institutional frameworks are generally considered essential for attracting FDI and strengthening the relationship between FDI and remittances, this pattern does not appear to apply to BRICS-T countries. In the short run, by contrast, the International Property Rights Index has a positive effect on FDI, implying that high governance quality tends to attract FDI over shorter time horizons. JEL: C33, F21, F24
They Call It Love: The Politics of Emotional Life by Alva Gotsby Verso Books, 2023.
Relation between Liquidity Creation, Profitability, and Regulatory Capital in Islamic and Conventional Banks of GCC Countries
This study examines the interrelationship between liquidity creation, regulatory capital, and bank profitability in the Gulf Cooperation Council (GCC) banking sector. Using dynamic panel data and the ‘generalized method of moments’ (GMM) estimator for the period 2009–2023, we explore how these variables influence each other in a region characterised by oil-dependent economies and a dual banking system (comprising both Islamic and conventional banks). Our findings reveal a negative bidirectional relationship between liquidity creation and regulatory capital, supporting the financial fragility hypothesis. However, this relationship varies significantly across bank types. We also find a positive association between liquidity creation and bank profitability, suggesting that banks generating more liquidity tend to perform better, which is contrary to the bankruptcy cost theory. In contrast, regulatory capital negatively affects bank profitability, although the magnitude and direction of this relationship depend on the capital definition used. By focusing on this unique regional and institutional setting while incorporating bank type heterogeneity, this study offers novel insights into the regulatory-performance-liquidity nexus and contributes to the literature on banking in emerging economies. JEL: G21, G28
Energy Intensity in CIS Economies: Insights into Convergence with OECD Benchmarks
This study evaluates energy intensity convergence in Commonwealth of Independent States (CIS) economies in comparison to the OECD average from 2000 to 2019, utilising β-convergence and σ-convergence analyses based on conventional unit root analysis alongside the KSS stationarity approach, which accounts for data nonlinearities, and the Phillips–Sul club convergence procedure. The results indicate that most CIS countries did not achieve energy intensity convergence during the period under review. Furthermore, while the Phillips–Sul test classifies all studied countries, including the OECD-20, into a single convergence club, it only presents weak evidence of significant convergence. This limited convergence is likely hindered by the continued presence of Soviet-era manufacturing infrastructure in many CIS economies. From a policy perspective, the development of comprehensive economic frameworks that incorporate legal, institutional, technical, and financial reforms, supported by targeted investments in research, cutting-edge technologies, and updated standards, is essential to significantly boost energy efficiency and effectively address challenges on both the supply and demand sides. JEL: C10, C12, Q43, Q48
Income Convergence and Divergence in European Regions: Insights and Policy Implications
The allocation of wealth in society has been a fundamental question and challenge in economics. Concentrating most wealth in a small segment of society while leaving the rest with a smaller portion can lead to income inequality and social issues. Income inequality varies across cultures, historical periods, economic structures, and economic systems. Our study tests and analyzes comparative income convergence in Eastern Europe, Western Europe, Central Europe, and the Baltic regions. It is important to note that our model is region-specific rather than country-specific. Our study asserts that income levels converge at an average level and within states, promoting income distribution convergence. The analysis was conducted to examine stochastic convergence in Europe within the panel stationarity (Fourier KPSS) test, revealing that regional economic inequalities in Europe are likely to either persist or even widen. JEL: C23, D31, O18, H20
Cryptocurrency Returns and Volatility Spillover During an Era of Uncertainty: COVID-19 and VIX
This study aims to investigate the volatility of the cryptocurrencies during uncertainty created by Covid 19. For this purpose, the relationship between cryptocurrencies both pre- and post-Covid 19 era was introduced into the mean equation. The mean equation applies the VAR (1) - BEKK GARCH-M (1,1) method. Out of 23,845 cryptocurrencies, the research focuses on the 8 with the biggest market volume. As a result, not all cryptocurrencies can be linked to the research findings. Additionally, the data after Covid 19 covers the years January 2020 through March 2022, whereas the data before Covid 19 covers the years January 2018 through December 2019. Descriptive statistics show that DOGE coin has the most volatility and BNB has the highest return. BTC has the lowest volatility among the analyzed cryptocurrencies, it can be shown. It is interesting to see that bitcoin returns have a positive correlation. The ETH and LITE have the strongest favorable association. Due to the lag in its return during the pre-Covid 19 timeframe, BTC has a detrimental impact on the returns of other coins. The returns of other coins, including its own, are increased by the DOGE coin's one-period lagged return. It is also noteworthy that only BNB, XKM, and XRP are statistically significantly impacted by VIX spikes. Except for ADA, DOGE, and XLM, the one-period lagged return of BTC has a favorable impact on the returns of other coins. It may be said that both the pre-Covid-19 era and the post-Covid-19 era are affected by this condition. The study highlights the fact that cryptocurrencies experience first instant (average) volatility. The long-term uncertainties of other cryptocurrencies are statistically significantly and favorably impacted by the long-term uncertainties in Bitcoin. This situation can express the dominance of BTC among other cryptocurrencies. Additionally, investor behavior in the pre-Covid 19 and post-Covid 19 periods varied. Additionally, it is advised that investors invest more in BNB during the post-Covid 19 period than they did during the pre-Covid 19 time. A review of the literature on Covid 19 and the effect of global uncertainties on cryptocurrencies reveals that: 1) there is a dearth of conclusive evidence on return and volatility spreads across major cryptocurrencies, which is crucial for any investment decision regarding portfolio diversification and hedging strategies; and 2) there are two main gaps regarding the dearth of evidence on return and volatility spillovers between leading cryptocurrencies during a catastrophic event. By concentrating explicitly on the effect of Covid 19 and global uncertainties on cryptocurrencies, our study aims to close this gap in the literature.
How to Enhance the Fiscal Performance of Municipalities: A Nonlinear Examination of Turkish Metropolitan Municipality Experience
We investigate the effects of metropolitan municipal expenditure and revenue on fiscal performance using linear and nonlinear panel data analyses. The empirical results of the nonlinear analysis, which constitutes the original value of our study, indicate that the deterioration in fiscal performance due to investment expenditures is lower when the current budget balance exceeds the estimated threshold level. However, the effect of municipal own-source revenue on budget balances differs in terms of the level of dependency on the central government. The fiscal policy reflections of our findings underline the importance of optimizing expenditure and savings levels and reducing dependency on the central government to enhance the fiscal performance of metropolitan municipalities. JEL: H70, H77, C23.
Assessing the Impact of Physical Infrastructure, Border Efficiency, and Institutional Quality on the Export Performance of Pakistan: Gravity Model Analysis on Commodity Data
In this study, our primary objective is to examine the impact of physical quality infrastructure, border efficiency, and institutional quality on the commodity export flow from Pakistan to its top trading partners, utilizing the gravity trade model. For analysis, the study employs several econometric approaches, including the Poisson Pseudo-Maximum Likelihood (PPML), which is our primary estimator. Among the variables in basic gravity models, the GDP of partner countries proved to be a significant determinant, having a favorable impact on the export flows of most commodities. The analysis revealed a negative relationship between export flows and geographical distance across most industries. The findings suggest that rupee depreciation does not support increasing export flows for most of the selected industries. Furthermore, the exports of most industries significantly increase due to improved infrastructure quality and enhanced border efficiency in importing countries. In partner countries, the estimates associated with institutional quality provided mixed results, with most industries yielding positive or insignificant outcomes. Conversely, the physical quality of infrastructure, border efficiency, and institutional quality in Pakistan appeared insignificant in most industries. JEL: F14
Examining the Impact of Monetary Policy in Turkey: TVP-VAR with Stochastic Volatility
This study aimed to examine the time-varying effects of monetary policy on macroeconomic variables, addressing the price puzzle problem in Turkey from 1994 and 2020 by using a time-varying parameter vector autoregression with a stochastic volatility model. The spread between long-term and short-term interest rates served as a measure of monetary policy. The empirical evidence indicated that positive innovations in the spread decrease inflation, economic activity, total credit, and the exchange rate. Moreover, it was determined that the responses to monetary policy shocks have changed over time. The responses to positive innovations in the spread increased in absolute value after 2017, suggesting that the effects of monetary policies implemented after this period on the economy have intensified. These findings underscore the need to employ a time-varying model alongside dynamic monetary policy measures to ascertain the changing effects of policy interventions. Therefore, Turkish policymakers should consider the increasing sensitivity of the economy to monetary policy actions when designing future interventions, particularly for managing inflation and stabilizing economic activity. JEL: C11; C32; E52
Is There A Relationship Between Financial Development And Geopolitical Risk Indices And Sustainable Development Goals? A Study on E3 Countries
This paper explores the correlation between the Financial Development Index (FDI) and the Geopolitical Risk Index (GPR) in relation to Sustainable Development Goals (SDGs) within the E3 countries: Germany, France, and the United Kingdom. With limited research available on the interaction between these indices and the SDGs, this study aims to bridge that gap by focusing on SDG 13 (Climate Action) and SDG 7 (Affordable and Clean Energy). Using data spanning from 2000 to 2021, the analysis employs ARDL and Dynamic Conditional Correlation (DCC) models to assess the impact of geopolitical risks and financial development on these sustainability targets. Findings reveal that in Germany, there are significant long-term relationships between FDI and both SDG 13 and SDG 7, with geopolitical risks negatively impacting both goals. Economic growth was observed to have a stronger influence on SDG 13. In France, FDI positively affected SDG 13 but had no statistically significant impact on SDG 7. Geopolitical risks had adverse effects on both goals, while economic growth’s impact on SDG 7 was found to be insignificant. In the UK, no significant long-term relationships were identified; however, short-term analysis highlighted notable effects of FDI and geopolitical risks on SDG 7. The DCC analysis revealed that the relationship between SDG 13 and SDG 7 was relatively strong around 2000 but weakened over time. JEL: C58, G20, O44, Q50
Does Central Bank Independence Contribute to Fiscal Prudence in EU Countries?
This study explores the influence of central bank independence (CBI) on fiscal deficits in 27 European Union (EU) member states from 1990 to 2023. Utilizing system generalized method of moments, we find that countries with more independent central banks tend to exhibit stronger fiscal balances. However, the impact is tempered within the Eurozone. Positive coefficients for GDP growth, adherence to fiscal rules, and democratic governance structures highlight their importance for fiscal sustainability. Our findings underscore the complex interplay of factors shaping fiscal balances, emphasizing the need for policy coordination and prudent fiscal management within the EU. JEL: E58, E50; H62.