The Public Finances: An Introductory Textbooks.

Purpose The Irish fiscal position was significantly affected by the recent financial crisis. Budgetary surpluses quickly gave way to significant deficits post 2007, culminating into a lengthy excessive deficit procedure and entry into a formal EU/IMF assistance programme in 2010. Much of the deterioration in the public finances was caused by a sharp decline in property-related taxes because the Irish housing market rapidly contracted. In this paper, the authors quantify the extent to which disequilibria in the housing market can affect the tax take, finding significant implications over an extended period. Design/methodology/approach The authors attempt to quantify the extent of housing-related tax windfall gains and losses in Ireland over a 30-year period as a result of disequilibrium in the housing market. This involves a three-step modelling approach where we relate property-dependent taxes to the housing market while estimating equilibrium in the latter before solving for the tax take consistent with that equilibrium. In so doing, the authors find that the fiscal position compatible with equilibrium in the housing market has at times diverged greatly from actual outturns. Findings This paper confirms the significant role played by the housing market in influencing both the tax-take and the overall fiscal position. The authors find that there have been a number of instances where excesses in the housing market have spilled over into fiscal aggregates, notably in the housing bubble period between 2003 and 2008. However, with the on-going adjustments in the housing market, it would appear that prices and volumes have overcorrected in recent years. Overall, much greater emphasis should be given to the role of the housing market in forecasting key taxation aggregates. Originality/value The recent crisis highlighted how domestic policy mistakes (both in terms of budgetary planning and financial market regulation) can greatly amplify economic shocks. Irish budgetary policy in the run up to the financial crisis of 2008/2009 was clearly based on unsustainable levels of housing-related tax receipts. This paper highlights the need for a much more granular approach in framing tax forecasts and in assessing the public finances by more explicitly factoring in housing market developments.

Download Full-text

I conti pubblici nel decennio 1998-2007: fattori temporanei, tendenze di medio periodo, misure discrezionali

ECONOMIA PUBBLICA ◽

10.3280/ep2008-001005 ◽

2009 ◽

pp. 139-175

Author(s):

Sandro Momigliano ◽

Maria Rosaria Marino ◽

Pietro Rizza

Keyword(s):

Monetary Union ◽

European Monetary Union ◽

Capital Expenditure ◽

Economic Cycle ◽

European Monetary ◽

Public Finances ◽

The Public ◽

Rapid Deterioration ◽

Structural Improvement

- The paper examines the development of Italy's public finances after the consolidation period 1992-97, which secured participation in the European Monetary Union from the outset. The «structural» developments in the main budgetary components are assessed, excluding the effects of the economic cycle and of temporary measures. The analysis shows a rapid deterioration in the years 1998-2003, whose roots can be traced back to the consolidation of the early 1990s, achieved primarily by means of tax increases and cuts in capital expenditure. Since 2004 there has been a structural improvement, initially modest but substantial in 2006 and 2007. Sustaining this adjustment and making further progress may again prove difficult, as the fiscal correction is similar in nature to the previous consolidation effort. Looking at the whole period 1998-2007, the deterioration of the public finances seems attributable to the difficulty to restrain the growth of current primary expenditure.

Download Full-text

Consolidating the Public Finances

OECD Economic Surveys: Ireland 2003 - OECD Economic Surveys: Ireland ◽

10.1787/eco_surveys-irl-2003-4-en ◽

2003 ◽

pp. 37-46

Author(s):

Keyword(s):

Public Finances ◽

The Public

Download Full-text

The Public Finances and the Economic Cycle

Reforming Britain’s Economic and Financial Policy ◽

10.1057/9780230599833_12 ◽

2002 ◽

pp. 203-229

Author(s):

Ed Balls ◽

Gus O’Donnell

Keyword(s):

Economic Cycle ◽

Public Finances ◽

The Public

Download Full-text

The Politics of Fiscal Squeeze

When the Party’s Over ◽

10.5871/bacad/9780197265734.003.0001 ◽

2014 ◽

Cited By ~ 3

Author(s):

David Heald ◽

Christopher Hood

Keyword(s):

Public Finances ◽

The Public ◽

Different Types ◽

Blame Avoidance ◽

Credit Claiming

This chapter conceives ‘fiscal squeeze’ as political effort to correct the public finances by raising taxes or cutting spending (or both), distinguishing different types of squeeze. It poses three questions about such squeezes, namely whether there is something special about the politics of austerity or retrenchment, whether fiscal squeeze presents credit-claiming opportunities or severe blame-avoidance challenges to elected governments, and how consequential the effects of fiscal squeezes are. It argues that to put fiscal squeezes into perspective we need to observe what else is happening in the relevant country and in the outside world, to examine what happened afterwards, and to compare fiscal squeezes with one another to see what, if any, common patterns they display. It introduces nine different cases of fiscal squeeze in democracies ranging from the early 1800s to the early 2000s. Each of those cases can be seen as puzzling or contested in some way.

Download Full-text