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We formulate and estimate a simple fiscal policy reaction function for the euro area and individual euro area countries. Our reaction function allows for primary surpluses to feature three components: an anti-cyclical response of primary surpluses to the output gap, a response to the debt-GDP...
Persistent link: https://www.econbiz.de/10010235448
The German debt brake is often regarded as a great success story, and has therefore served as a role model for the Euro area and its fiscal compact. In this paper we fundamentally criticize the debt brake. We show that (1) it suffers from serious shortcomings, and its success is far from certain...
Persistent link: https://www.econbiz.de/10010187671
It is by now a widely shared insight that fiscal policy needs to be re-strengthened as a macroeconomic policy instrument within European macroeconomic policies: Recent experiences with austerity policies, new research regarding the size of the fiscal multiplier and the fact that monetary policy...
Persistent link: https://www.econbiz.de/10011477456
This paper examines the question whether joining EMU or the breach of the Stability and Growth Pact in 2003 had an … having joined EMU or after having breached the Pact in 2003. These results can be explained with the fact that the Pact was …
Persistent link: https://www.econbiz.de/10011488439
Should the government run fiscal deficits in response to an adverse external shock that warrants transfer of resources from production of non-traded to traded goods? This paper considers normative fiscal policy implications of sectoral adjustment costs in a two-sector model with overlapping...
Persistent link: https://www.econbiz.de/10011400804
Since 2008, the world economy has been facing the consequences of the global financial crisis. As a result, many economic policy paradigms have been revised, and this process is far from complete. The policy area, which needs a fundamental rethinking (especially in advanced economies), relates...
Persistent link: https://www.econbiz.de/10011706402
This paper examines effects of political ideology of a governing party on fiscal outcomes, using data from eight Central and Eastern European countries in the 2001-2017 period. The analysis shows that there is a statistically significant effect of conservative governments on fiscal variables,...
Persistent link: https://www.econbiz.de/10012157827
We explore the dynamics of inflation, inflation expectations, and seigniorage-financed fiscal deficits in Mexico. To do so, we estimate the model in Sargent, Williams, and Zha (2009) using Mexican CPI inflation data. This model features dual expected inflation equilibriums and regime switching...
Persistent link: https://www.econbiz.de/10012165948
In the early 2020s sharp surge of inflation, unprecedentedly high levels of government debt and deficits fueled attention for the Fiscal Theory of the Price Level (FTPL). This theoretical framework for fiscally induced inflation is well-known and controversially discussed. However, empirical...
Persistent link: https://www.econbiz.de/10015374640
This study analyzes the correlation between the primary budget balance and the public debt over the last two decades, for a panel of 12 countries from Central and Eastern Europe, in order to assess their debt sustainability, the level of debt at which fiscal fatigue may occur, as well as the...
Persistent link: https://www.econbiz.de/10014312934