scholarly journals Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone

2017 ◽  
Vol 107 (7) ◽  
pp. 1904-1937 ◽  
Author(s):  
Philippe Martin ◽  
Thomas Philippon
Keyword(s):  
Market Segmentation ◽  
Great Recession ◽  
Fiscal Policies ◽  
Labor Costs ◽  
The Great Recession ◽  
Credit Cycles ◽  
Macroprudential Policies ◽  
Fiscal Austerity ◽  
The Impact ◽  
Identification Strategy

We provide a comprehensive account of the dynamics of eurozone countries from 2000 to 2012. We analyze private leverage, fiscal policy, labor costs, and spreads, and we propose a model and an identification strategy to separate the impact of credit cycles, excessive government spending, and sudden stops. We then ask how periphery countries would have fared with different policies. We find that countries could have stabilized their employment if they had followed more conservative fiscal policies during the boom. Macroprudential policies and an early intervention by the central bank to prevent market segmentation and reduce fiscal austerity would also have significantly reduced the recession. (JEL E24, E32, E58, E62, F33, F42, H61)

Fiscal policies in a monetary union: the eurozone case

2020 ◽  
Vol 17 (2) ◽  
pp. 156-170
Author(s):  
Gennaro Zezza
Keyword(s):  
Great Recession ◽  
Public Expenditure ◽  
Fiscal Policies ◽  
Unemployment Benefits ◽  
Medium Term ◽  
The Great Recession ◽  
Financial Position ◽  
Fiscal Austerity ◽  
Severe Recession ◽  
The Cost

We argue that the institutional framework of the eurozone was designed to deny a role for fiscal policy. However, the Great Recession of 2008–2009 forced governments to intervene, mainly to avoid the collapse of their financial systems. At the same time, the severe recession implied a decrease in tax revenues, and an increase in some components of public expenditure – such as unemployment benefits, which implied an increase in public deficits. When the crisis seemed to be over, the Maastricht rules gave priority to restoring fiscal targets, even at the cost of prolonged unemployment and stagnation in countries like Greece and Italy. Using the three-balances approach pioneered by Godley, we argue that such policies require the achievement of an external surplus, or else fiscal austerity will worsen the financial position of the private sector. We show that this is indeed how most eurozone countries moved, and argue that such policies are fragile, and possibly not sustainable in the medium term. We suggest the introduction of fiscal currencies as one way of introducing a degree of freedom in the sustainability of the eurozone.

scholarly journals The Impact of the Great Recession on Monetary and Fiscal Policy in Developed Market Economies

2015 ◽  
Vol 6 (1) ◽  
pp. 56-71 ◽  
Author(s):  
Damir Šehović
Keyword(s):  
Fiscal Policy ◽  
Great Recession ◽  
Fiscal Policies ◽  
Market Economies ◽  
The Great Recession ◽  
The Great Depression ◽  
Theoretical Assumptions ◽  
Monetary And Fiscal Policy ◽  
The Impact

Abstract Background: With the occurrence of the crisis in 2007, which caused the largest economic contraction since the Great Depression in the thirties, it has become evident that the previous understanding of strategies, effects and roles of monetary and fiscal policy should be redefined. Objectives: The aim of this paper is to illustrate a possible expected change in monetary and fiscal policy in developed market economies that could occur as a consequence of the Great Recession. Methods/Approach: The paper provides a comparative analysis of various primary economic variables related to the developed OECD countries, as well as the empirical testing of the selected theoretical assumptions. Results: The changes in monetary policy refer to the question of raising target inflation, considering a possible use of aggregate price level targeting and paying attention to the role of central banks in suppressing the formation of an asset bubble. The success of fiscal policy in attaining stabilization depends on the size of possible fiscal measures and creation of automatic stabilizers. Conclusions: For the most part, monetary and fiscal policies will still stay unchanged, although some segments of these policies need to be improved.

scholarly journals Preventing NEETs during the Great Recession: the effects of mandatory activation programs for young welfare recipients

2021 ◽  
Author(s):  
Emile Cammeraat ◽  
Egbert Jongen ◽  
Pierre Koning
Keyword(s):  
The Netherlands ◽  
Great Recession ◽  
Economic Recession ◽  
Welfare Recipients ◽  
Employment Effects ◽  
The Great Recession ◽  
Employment Education ◽  
The Impact

AbstractWe study the impact of mandatory activation programs for young welfare recipients in the Netherlands. What makes this reform unique is that it clashed head on with the Great Recession. We use differences-in-differences and data for the period 1999–2012 to estimate the effects of this reform. We find that the reform reduced the number of welfare recipients but had no effect on the number of NEETs (individuals not in employment, education or training). The absence of employment effects contrasts with previous studies on the impact of mandatory activation programs, which we argue is due to the reform taking place during a severe economic recession.

Shock or Design: What Drives Fiscal De/Centralization? A Comparative Analysis of Twenty-Nine OECD Countries, 1995–2017

2020 ◽  
Vol 51 (1) ◽  
pp. 1-26
Author(s):  
Tobias Arnold ◽  
Sean Mueller ◽  
Adrian Vatter
Keyword(s):  
Crisis Management ◽  
Great Recession ◽  
Political System ◽  
Multidimensional Approach ◽  
New Paradigm ◽  
The Great Recession ◽  
The Past ◽  
Fiscal Centralization ◽  
The Impact ◽  
Active Policy

Abstract Over the past decades, decentralization has become the new paradigm in how states should organize power territorially. Carefully planned institutional re-designs are the most visible expression thereof. Yet the Great Recession of 2007–2009 has pushed governments into the opposite direction, i.e., towards centralization, to better weather the fiscal drought. Given these contradictory developments, this article compares the effects of twenty-three separate state reforms with the impact of the Great Recession on fiscal centralization in twenty-nine countries over more than two decades. In the main, our analyses attribute a larger effect to design, i.e., pro-active policy making through reforms, than reactive crisis management after a great shock. However, this difference is only apparent once we consider a state’s institutional structure, that is whether a political system is unitary or federal. Our findings thus highlight the need for a multidimensional approach to better understand the drivers of fiscal de/centralization.

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