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Tag Archives: fiscal policy

Uncertainty over output gap and structural-balance estimates remains elevated

The EU fiscal framework strongly relies on the structural budget balance indicator, which aims to measure the ‘underlying’ position of the budget. But this indicator is not observed, only estimations can be made. This post shows that estimates of the European Commission, the IMF, the OECD and national governments widely differ from each other and all estimates are subject to very large annual revisions. The EU should get rid of the fiscal rules that rely on structural balance estimates and...

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The campaign against ‘nonsense’ output gaps

A campaign against “nonsense” consensus output gaps has been launched on social media. It has triggered responses focusing on the implications of output gaps for fiscal policy under EU rules, especially for Italy. But the debate about the reliability of output-gap estimates is more wide-ranging. The debate on the output gap is hardly new. What motivates this review is rather the social media campaign Robin Brooks (Institute of International Finance) recently launched against “nonsense”...

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How visible are independent fiscal institutions in public debate?

Independent fiscal institutions have no formal powers to act and have to rely on soft power to influence the budgetary process. This blog post investigates how they exercise this soft power by enhancing public scrutiny of fiscal policies. By: Grégory Claeys Date: April 3, 2019 Topic: European Macroeconomics & Governance In the aftermath of the crisis, new EU legislation[1] was introduced requiring member states to put in...

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Secular stagnation and the future of economic stabilisation

Larry Summers’ and Łukasz Rachel’s most recent study documents a secular fall in neutral real rates in advanced economies. According to the authors, this fall would be even more marked in the absence of offsetting fiscal policies. Policymaking in a world of permanently low interest rates may be hard to navigate, especially in troubled waters. We review economists’ views on the matter By: Inês Goncalves Raposo Date: April 1, 2019 Topic: European Macroeconomics & Governance...

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The higher yield on Italian government securities is becoming a burden for the real economy

Francesco Papadia and Inês Gonçalves Raposo have recently written on Italian fiscal policy and the increase in the spread between Italian (BTP) and German (Bund) government. Since then, two developments have taken place: one good, and one bad. This blog post reviews them. On September 10th 2018 we published a post with the title: ”The higher yield on Italian government securities could soon be a burden for the real economy”. In that post we documented a very straightforward issue: the...

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Is public debt a cheap lunch?

The fiscal and welfare costs of public debt, following Olivier Blanchard's presidential lecture at the American Economic Association, in which he suggested both might be lower than expected. We review his paper, along with several scholars' comments, and provide a quick comparison with the European context. Olivier Blanchard sparked a vivid debate with his last presidential lecture at the American Economic Association, focusing upon the costs associated with public debt. In a nutshell,...

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Economic policy challenges in Southern and Eastern Mediterranean

For a long time, southern and eastern Mediterranean countries struggled with serious socio-economic challenges and dysfunctional economic systems and policies. Marek Dabrowski reviews the challenges the region has to face to get out of a low growth trap. For a long time, southern and eastern Mediterranean countries (henceforth SEMC)[1] struggled with serious socio-economic challenges and dysfunctional economic systems and policies. In the 2010s their macroeconomic performance further...

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Plädoyer gegen eine Politik der Scheinlösungen

Der Daueraufschwung verdeckt, dass Deutschland für die nächste Krise schlecht gerüstet ist. Und das Zeitfenster für Reformen schließt sich. By: Jochen Andritzky Date: October 31, 2018 Topic: European Macroeconomics & Governance Seit vielen Jahren bemüht die Bundesregierung das Narrativ, Deutschland gehe es nicht nur ökonomisch gut, sondern sei auch für die Zukunft wirtschaftlich gewappnet. Und in der Tat: Das...

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European fiscal rules require a major overhaul

In this Policy Contribution prepared for the French Conseil d’Analyse Économique, the authors assess current European fiscal rules and propose a major simplification. They recommend substituting the numerous rules with a new simple one, which would help reconcile fiscal prudence and macroeconomic stabilisation of the economy. This Policy Contribution was prepared for the French Conseil d’Analyse Économique. The reconsideration of the complex set of European fiscal rules should be...

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Reforming the EU fiscal framework

Researchers have often highlighted the problematic nature of the currently very complex EU fiscal framework. Here we review economists’ views on how it should be changed. By: Silvia Merler Date: September 17, 2018 Topic: European Macroeconomics & Governance VoxEU has been publishing a number of contributions on reforming the EU fiscal framework. Coen Teulings thinks that the EU fiscal rules urgently need revision, because...

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