Prior to the launch of the euro, academics and policymakers were concerned that the loss of the monetary policy instrument would deprive participating countries of a vital tool to respond to country-specific economic shocks. This concern was rooted in the generally accepted proposition that...

This paper examines economic policy interactions in the Economic and Monetary Union when the assessment of cyclical conditions in real time is surrounded by uncertainty. On the basis of a simple stylised model it shows that different views about the output gap on the side of the policy players -...

Cover pagesText AnnexesThe purpose of this paper is to analyse budgetary policies carried out during and after severe recessions. Since the agreement on the "Stability and Growth Pact" by the European Council in Dublin in December 1996, interest in this issue has increased significantly. The...

This paper uses an estimated DSGE model for the euro area to study the effects of fiscal stabilisation policies. There are at least two features of the euro area economy which makes this analysis interesting. First, there are nominal rigidities in goods and labour markets, and there are...

This paper presents results of an on-going joint European Commission / OECD project, aimed at monitoring the direct influence of tax and benefit instruments on household incomes. Indicators of financial work incentives are needed for identifying any undesired influences of taxes and social...

Forecast errors are large in the recently acceded Member States and the mistakes have a similar order of magnitude in the Commission services' forecasts, Consensus forecasts and projections made by national authorities. The prediction mistakes cannot be attributed to bias or autocorrelation....

It is largely recognised that fiscal policy will have larger responsibilities for cyclical stabilisation in EMU given the loss of the monetary instrument. At the same time, the EMU's budgetary framework emphasises the need to rely on automatic fiscal stabilisers, rather than active policies in...

The paper looks at the evidence on the widespread hypothesis in the academic literature and by some of the new Member States' governments that accession will bring about fiscal strains and requires higher budget deficits. It starts by calculating the expected new Member States' payments from the...

Fiscal policy measures are a key means by which governments can influence distribution and poverty, but in fact the relationships between fiscal policy and poverty are not well understood. The most commonly used technique for assessing the distributional impact, benefit incidence analysis, is...

This paper proposes a theoretical explanation of the empirical finding that private consumption increases in response to an increase in government spending. The explanation requires two ingredients. First, labor demand expands (e.g. prices are sticky). Second, general non-separable preferences...