This paper studies the effects of discretionary fiscal policy shocks under different exchange rate regimes within a structural vector autoregressive (SVAR) model. We first suggest that by estimating the effects of fiscal policy shocks in two structurally similar small open economies that have...

Euro Area member states have agreed to introduce a structural budget balance target to their national legislation (Treaty on Stability, Coordination and Governance). However, there exists no commonly agreed methodology to calculate this macroeconomic indicator. This report presents the...

This paper studies real-time measures of the output gap and fiscal policy stance estimates for EU countries. We construct a comprehensive real-time data set on fiscal forecasts and study whether there are systematic differences between the European Commission and IMF estimates of the output gap...

The sovereign debt crisis in the euro area has raised interest in early warning indicators, aimed at signalling the build-up of fiscal stress in advance and helping prevent crises by means of a timely counteraction of fiscal and macroeconomic policies. This paper presents possible improvements...

In this paper we reflect on the role that fiscal policy could play in the resolution of the crisis in Eurozone countries crippled by both public and private debt, and beset by growth and competitiveness problems. As an illustration, we revisit the Spanish case, a paradigmatic example of the...

Should rational agents take into consideration government policy announcements? A skilled agent (an econometrician) could set up a model to combine the following two pieces of information in order to anticipate the future course of fiscal policy in real-time: (i) the ex-ante path of policy as...

This paper reviews the existing empirical evidence on the short term impact on prices of fiscal variables and assesses it against new results from harmonised simulations, conducted with six well established econometric models used by the ECB and five national central banks (NCBs) of the...

We reassess the result of unsustainability of the euro with respect to inflation differentials claimed by Wickens (2007) by specifying an open-economy version of a two-region New Keynesian model for EMU and demonstrate that the result by Wickens does not hold in general. We are able to derive a...

This paper aims to test the validity of the Ricardian proposition for the Spanish economy from three different approaches: a) by testing its theoretical implications on the stability of national saving and the relationship between fiscal and current account balances, b) by carrying a number of...

What are the output responses to fiscal policy? Despite important advances reported in the literature, quantifying the size of the fiscal multiplier remains a challenge. Indeed, the quest to estimate a unique fiscal multiplier is probably an ill-posed one. The magnitude of the multiplier may...