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...

This paper shall give an overview of the implications to the sectoral balances stemming from the implementation of the Fiscal Compact in the Euro area in 2013. Since there is noew a more or less strict limit to deficit spending - absent from cyclical factors - some other sector has to make up...

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...

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...

Much of the research on fiscal multipliers has used reduced form modelling approaches. While these models have been extended to include richer controls and identification approaches, it remains unclear whether shocks identified capture the true structural shocks. An alternative way to identify...

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...

We assess the fiscal behaviour in the European Union countries for the period 1990-2005 via the responsiveness of budget balances to several determinants. The results show that the existence of effective fiscal rules, the degree of public spending decentralization, and the electoral cycle can...

This paper explores implications of climate change for fiscal policy by assessing the impact of large scale extreme weather events on changes in public budgets. We apply alternative measures for large scale extreme weather events and conclude that the budgetary impact of such events ranges...