Neoliberalismen som dominerende makroøkonomisk diskurs

This paper demonstrates that mainstream General Equilibrium Models (GEM) are dominated by neoliberal ideology. These mathematical models are pre-designed to always converging full-employment equilibrium and private-sector equilibrium. The behavioural equations are derived from the assumption of individual utility and profit maximization and the rational expectation (full foresight) hypothesis. Accordingly, policy recommendations consistent with GEM are neoliberal as they advocate (1) avoiding demand management; (2) balancing the public sector’s (structural) budget; and (3) leaving monetary policy to an independent central bank with responsibility for price stability; while (4) distributional and environmental consequences for production are considered irrelevant. This is illustrated by examples from the Danish macroeconomic environment where GEM (ADAM and DREAM) employed by the Treasury and the Council of Economic Advisors are dominant when it comes to medium and long-term policy recommendations. Finally, the article challenges this logic and objective foundation of mainstream macroeconomics.

Political Budget Cycles in the European Union: New Evidence of Fragmentation

This paper deals with the possible existence of political budget cycles (PBCs) within the European Union (EU). I use panel data for 28 EU countries from 1995 to 2016 and provide estimates based on dynamic panel regressions. I employ a system-GMM estimator complemented by the Principal Component Analysis (PCA) to limit the number of instruments. The specifications include structural budget balances related to the potential GDP, thereby limiting the initial endogeneity. These measures capture the true motivation behind fiscal policies. The results suggest that the EU member states exhibit PBCs: (i) the intervention occurs in the year before elections and (ii) the structural budget balance to the potential GDP ratio is lower by −0.41 percentage points a year before elections. In addition, I have investigated the EU fragmentation in terms of the PBCs and selected 8 countries’ characteristics correlating to the existence of these cycles. These include lower GDP per capita, post-communist background, low tax burden, high perceived corruption, low levels of media freedom and internet usage, lower number of directly voted-in legislative officials, and a low parliamentary voter turnout.

The European Union as a Trigger of Discursive Change: The Impact of the Structural Deficit Rule in Estonia and Latvia

Our paper explores how a rule prescribed by the European Union can bring about changes in the policy discourse of a member state. Drawing on the literatures of discursive institutionalism and Europeanization, the theoretical part discusses the factors that influence discursive shifts. The empirical part examines the discursive impacts of the introduction of the structural budget deficit rule, required by the Fiscal Compact, in Estonia and Latvia. It demonstrates how the discursive shifts have been shaped by the localized translations offered by civil servants, the entrance of additional actors to the policy-making arena, crisis experience, and the strategic interests of policy actors.

COMMONWEALTH Forum: Addressing Pennsylvania’s Structural Budget Deficit

In November 2016 Pennsylvania’s Independent Fiscal Office released a five-year projection of the health of the Commonwealth’s economy and budget. The long-term estimates were not promising as increasing expenditures outstripped existing sources of revenues. Left unchanged, the status quo would result in a deficit of almost $3 billion in fiscal year 2021–22. Tackling this “structural deficit” is one of the most difficult issues facing the state of Pennsylvania. Given the current political climate it should come as no surprise that there is no consensus on resolving this problem. COMMONWEALTH invited representatives from two very different policy perspectives to provide their solutions to the structural deficit. We would like to thank Bob Dick of the Commonwealth Foundation and Marc Stier of the Pennsylvania Budget and Policy Center for addressing this important issue in the COMMONWEALTH Forum.

FY2017--Output Cost Estimates and Budget Outturn Paper

With continued efforts to maximize the use of available resources, the FY 17 outturn represents a small increase in spending within a largely flat budget envelope. Reallocations from lower priority areas and efficiency gains, along with flexibility provided by carry forward resources enabled the Fund to deliver on the initiatives and priorities in the Global Policy Agenda and Management’s Key Goals. In terms of outputs, there was a small shift in spending from country and regional work to policy work. Within the former, spending moved from lending activities towards bilateral surveillance and capacity development. In terms of inputs, the structural budget was almost fully utilized. Highlights are presented followed by a discussion of the outputs and inputs. Details on capacity development are presented in the Annex.

Does the Structural Budget Balance Guide Fiscal Policy Pro-Cyclically? Evidence from the Finnish Great Depression of the 1990s

In this article, I evaluate the challenges related to the European Commission's output gap method of calculating the structural budgetary position, and assess its bottom-up alternatives in the EU's fiscal framework using the Finnish data for the years 1984–2014. The results reinforce the impression of the limited capacity of the output gap method to predict cyclical changes in real time and suggest that using the output gap method to steer fiscal policy tends to lead to a procyclical policy (stimulus in upturns and austerity in downturns). The bottom-up assessment methods that are based on discretionary fiscal policy measures appear to work better, and using them to steer fiscal policy could make the policy more effective.