Search results for "Union"

Is an Increase of the Fiscal Budget at EMU level Desirable?

2005

The birth of the European Monetary Union (EMU) has determined the creation of a common currency, the Euro, but unlike other monetary unions, the EMU does not have a central fiscal authority. The role of fiscal policy is left to the responsibility of the governments of the EMU member States. The new architecture modifies the assignment of the instruments to the objectives, especially those of stabilization. The loss of the sovereignty of monetary policy and exchange rate control by the individual member states has determined the inability to use two important instruments of insurance against the risks of shocks. Moreover, the Treaty of Maastricht and the Stability and Growth Pact (SGP) could…

National fiscal consolidations and regional inequality in Europe

2016

Using annual data for 13 European countries over the period 1980-2008, we assess the impact of national fiscal consolidations on the income inequality of European regions. Regional dispersion increases in the outcome of consolidation episodes, particularly, when packages are more severe and implemented through spending cuts rather than tax rises. From a policy perspective, these findings suggest that fiscal consolidations driven by reductions in government spending can exacerbate regional disparities and may ultimately counteract the European policy efforts to promote territorial cohesion. Our results are robust to alternative inequality measures, the occurrence of crisis episodes and the e…

The relationship between debt level and fiscal sustainability in organization for economic cooperation and development countries

2014

In this article we unify the traditional approaches to testing for fiscal sustainability considering the stock-flow system that fiscal variables configure. Our approach encompasses previous ways of testing for sustainability. The results obtained for a group of 17 Organization for Economic Cooperation and Development (OECD) countries point to weak fiscal sustainability, as well as to the existence of cointegration between deficit and debt, confirming the relevance of the stock-flow approach. Allowing for structural breaks and multicointegration turns out to be of critical importance to assess whether the fiscal authorities apply their policies looking for sustainability and whether, simulta…

Is the budget deficit sustainable when fiscal policy is non-linear? The case of Spain

2006

In this paper, we re-examine the long-run sustainability of budget deficits, when fiscal policy is conducted as a non-linear process. Our empirical methodology makes use of recent developments on threshold cointegration that consider the possibility of a non-linear relationship between government expenditures and revenues. The analysis is applied to the case of Spain, a country that has recently accomplished an important fiscal consolidation. Overall, our results suggest the presence of significant non-linear effects in Spanish fiscal policy, so that fiscal authorities would cut deficits only if they are ‘large’, which would assure in turn their long-run sustainability.

Deficit sustainability, and monetary versus fiscal dominance: The case of Spain, 1850–2000

2014

Abstract In this paper, we provide a test of the sustainability of the Spanish government deficit over the period 1850–2000, emphasizing the role played by monetary and fiscal dominance in order to get fiscal solvency. Since the condition of fiscal solvency was satisfied, government deficit would have been sustainable along the sample period. In addition, the whole period can be characterized as one of fiscal dominance.

Fiscal impact of the migration phenomenon

2019

Fiscal sustainability in EMU countries: A continued fiscal commitment?

2017

Abstract The aim of this paper is to study the sustainability of public finances in the Eurozone particularly after the 2007 financial crisis. This paper goes beyond the standard analysis of the univariate properties of the fiscal variables through the estimation of a time-varying fiscal reaction function on a 11-country panel for a period spanning from 1970 to 2014. Even if panel unit root or stationary tests may provide a rough first insight on the sustainability of the public finances, they fail to highlight the adjustment mechanisms to debt overhang in recent years. The main advantage of our empirical approach is that it clearly captures the government’s dynamic response to debt accumul…

How best to measure discretionary fiscal policy? Assessing its impact on private spending

2013

We develop a novel empirical approach to assess the effect of discretionary fiscal policy on private spending consisting of three stages: 1) extract the discretionary component of fiscal policy by estimating a fiscal policy rule; 2) use the residuals of the first-stage regression to investigate the existence of crowding-in and/or crowding-out effects both in the short and the medium term; and 3) condition the response of private spending on a set of country characteristics. We find that an expansion in discretionary fiscal policy boosts growth in the short term, but is detrimental in the medium term. In addition, the empirical findings suggest that the effect of discretionary fiscal policy …

Fiscal adjustments and income inequality: a first assessment

2012

Using a statistical approach to identify fiscal adjustments, we find that fiscal consolidation appears to shorten the income gap. Fiscal austerity plans that succeed in bringing public debt to a sustainable path seem to be more likely to reduce inequality. Expansionary fiscal adjustments are particularly important to promote changes in the income distribution.

Assessing long-term fiscal developments : a new approach

2011

We use a new approach to assess long-term fiscal developments. By analyzing the time-varying behaviour of the two components of government spending and revenue – responsiveness and persistence–, a feature not captured by automatic stabilisers, we are able to infer about the sources of fiscal deterioration (improvement). Drawing on quarterly data, we estimate recursively these components within a system of government revenue and spending equations using a Three-Stage Least Square method for eight European Union countries plus the US. The results suggest that significant changes in the fiscal stance (including those related to the current crisis) are reflected in the estimates of persistence …