Discretionary fiscal policy in the Euro area: Past, present and future

Abstract We test the relationship between the cyclically adjusted primary balance and alternative indicators of cyclical conditions for the euro area and 18 OECD countries over the period 1970-2009. A countercyclical stance of discretionary fiscal policy is found during bad times after 1999 in the euro area as a whole and in a few member countries only (France, Ireland and The Netherlands). It is also associated with high public deficits or low public debts. There is no significant case of procyclical fiscal policy after 1999, neither in good times nor in bad times.

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Government investment fiscal multipliers: evidence from Euro-area countries

Macroeconomic Dynamics ◽

10.1017/s1365100521000419 ◽

2021 ◽

pp. 1-19

Author(s):

Matteo Deleidi ◽

Francesca Iafrate ◽

Enrico Sergio Levrero

Keyword(s):

Fiscal Policy ◽

Euro Area ◽

Government Expenditure ◽

Structural Vector Autoregression ◽

Government Investment ◽

Fiscal Multipliers ◽

Discretionary Fiscal Policy ◽

The Government ◽

Local Projections ◽

Structural Vector

Abstract This paper aims to estimate the government investment fiscal multipliers in select European countries for the period 1970–2016. To do this, we combine Structural Vector Autoregression (SVAR) modeling with the Local Projections (LP) approach. We estimate models by also controlling for fiscal foresight, excluding the postcrisis period and distinguishing between Northern and Southern countries. Our findings suggest that an increase in government investment generates a “Keynesian effect” by engendering positive and permanent effects on the GDP level, even when government expenditure expectations are considered. Fiscal multipliers are close to 1 on impact and increase in the years after the implementation of a discretionary fiscal policy.

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The impact of COVID-19 on households´ income in the EU

The Journal of Economic Inequality ◽

10.1007/s10888-021-09485-8 ◽

2021 ◽

Author(s):

Vanda Almeida ◽

Salvador Barrios ◽

Michael Christl ◽

Silvia De Poli ◽

Alberto Tumino ◽

...

Keyword(s):

Fiscal Policy ◽

Disposable Income ◽

Income Loss ◽

Eu Member States ◽

Policy Interventions ◽

Discretionary Fiscal Policy ◽

Policy Measures ◽

The One ◽

The Impact ◽

The Eu

AbstractThis analysis makes use of economic forecasts for 2020 issued by the European Commission in Autumn 2019 and Spring 2020, and of a counterfactual under a no-policy change assumption, to analyse the impact of the COVID-19 crisis on EU households´ income. Additionally, our analysis assesses the cushioning effect of discretionary fiscal policy measures taken by the EU Member States. We find that the COVID-19 pandemic is likely to affect significantly households’ disposable income in the EU, with lower income households being more severely hit. However, our results show that due to policy intervention, the impact of the crisis is expected to be similar to the one experienced during the 2008–2009 financial crisis. In detail, our results indicate that discretionary fiscal policy measures will play a significant cushioning role, reducing the size of the income loss (from −9.3% to −4.3% for the average equivalised disposable income), its regressivity and mitigating the poverty impact of the pandemic. We conclude that policy interventions are therefore instrumental in cushioning against the impact of the crisis on inequality and poverty.

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Fiscal Sustainability in Aging Societies: Evidence from Euro Area Countries

Sustainability ◽

10.3390/su122410276 ◽

2020 ◽

Vol 12 (24) ◽

pp. 10276

Author(s):

María del Carmen Ramos-Herrera ◽

Simón Sosvilla-Rivero

Keyword(s):

Euro Area ◽

International Organizations ◽

Population Aging ◽

Fiscal Sustainability ◽

Sharp Rise ◽

Discretionary Fiscal Policy ◽

Using Data ◽

Sustainability Controlling ◽

Aging Societies

Fiscal sustainability remains a paramount challenge in the Euro Area (EA) countries after the sharp rise in public debt-to-GDP ratios in the aftermath of the financial crisis of 2008. Using data from 11 EA countries over the period 1980–2019, we apply panel data techniques to examine the effects of population aging on fiscal sustainability, controlling for key macroeconomic variables. Our results suggest that the discretionary fiscal policy is strongly persistent, not being consistent with long-term fiscal solvency. Moreover, our results indicate that the fiscal stance is countercyclical for the countries under study and that population aging poses a major challenge for fiscal sustainability. The findings are robust to a different grouping of countries within the sample (core and peripheral countries, relatively old and young countries, and relatively more and less indebted countries). We consider that our results may have some practical meaning for national policymakers and international organizations responsible for regional and global fiscal surveillance and might shed some light on the possible effects that population aging could have on the effort of EA countries to restore public finances on a sustainable basis.

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The role of automatic stabilizers in business cycle: the case of indonesia

European Journal of Government and Economics ◽

10.17979/ejge.2021.10.2.7366 ◽

2021 ◽

Vol 10 (2) ◽

pp. 167-184

Author(s):

Haryo Kuncoro

Keyword(s):

Fiscal Policy ◽

Standard Model ◽

Policy Instrument ◽

Economic Stability ◽

Fiscal Stimulus ◽

Quarterly Data ◽

Discretionary Fiscal Policy ◽

The Impact ◽

Automatic Stabilizers

TThe use of large fiscal stimulus packages to dampen the impact of Covid-19 recently has raised concerns about the effectiveness of the discretionary fiscal policy. This paper aims at analysing the feasibility of automatic fiscal stabilisers to mitigate economic fluctuations in the case of Indonesia. Using the IMF standard model for quarterly data over the period of 2001(1) to 2019(4), we find that the role of automatic fiscal stabilisers is getting greater both in revenue and spending. This implies that the automatic fiscal stabilisers are feasible as the main fiscal policy instrument for economic stability goals in the future. However, given the existing circumstances, Indonesia has to reform economic, regulatory, and institutional ecosystems in adopting the automatic fiscal stabilisers.

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