The extent to which EU fiscal policies have converged during the ERM period is investigated. Using tests for cointegration and weak exogeneity, it is found that the degree of commitment towards ERM membership influences the degree of fiscal integration in the EU. It is also found that the German...

This letter illustrates that Granger causality tests tend to be sensitive to irrelevant lag polynomials and could lead to wrong inference of non-causality. In view of the little insight one gets from economic theory about short-run dynamics, it suggests exclusion restrictions prior to causality...