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Fiscal Rules and Strategies under Externalities and Uncertainties

Deliverables

Final Conference

The Final Conference will be arranged in Brussels. The aim is to concentrate on the policy conclusions generated and discuss their implications with top-level experts and stakeholders. Adjoining press conference will be organized to inform wider audiences on the conclusions.

First lunch time seminar in Brussels

A lunch time seminar in Brussels for EU level policy makers to discuss the starting points of the project and the views of the Commission on the next steps in the fiscal coordination

Third lunch time seminar in Brussels

A lunch time seminar in Brussels for EU level policy makers to discuss the second set of results and their policy implications with EU level policy makers.

First Stakeholder Forum in Brussels

The first Forum will concentrate on taking stock on the situation prevailing at that time and knowledge accrued, but also some preliminary results are available at that time.

Second lunch time seminar in Brussels

A lunch time seminar in Brussels for EU level policy makers to discuss the first results of the project and their policy implications with EU level policy makers.

A dataset of fiscal variables

The dataset covers various real-time fiscal variables, including fiscal sustainability indicators. The data will be made available via the project website.

Second Stakeholder Forum in Warsaw

The second Shareholder Forum is arranged in Warsaw in month 24. Among other things, the forum will discuss fiscal coordination from the point of view of countries aiming to join EMU.

Empirical paper on measuring spillover effects in EMU and EU

This paper identifies fiscal spillovers in the EU countries empiricially, using the so called global vector autoregression (GVAR). Special attention will be paid to the question of whether or not spillovers are stronger within the EMU group than within the larger EU group due to tighter financial or trade links.

Working paper on stochastic modelling of labor productivity and structural deficits

This paper models asset yields and labor productivity with time-series methods, and uses stochastic population projections with embedded forecast revisions to describe demographic uncertainties. It also reviews uncertainty assessment practices in current ageing expenditure projections and fiscal sustainability calculations of the EU Commission and other organizations.

A description of the macroprudential policy block of the NiGEM model (selected European countries)

This projects extends the NiGEM model to include examples of the estimated macroprudential relationships - which will allow us to illustrate the monetary-fiscal-macroprudential policy mix in selected European countries. This paper describes this extension.

Paper on the implementation of fiscal rules across the EU

This paper studies the implementation of fiscal rules across the EU. It draws on the experience of three annual cycles.

Working paper on fiscal policy spillovers

This paper uses the NIESR’s NIGEM model to investigate the effects of fiscal policy spillovers. It examines the macroeconomic spillovers in Europe following different type of fiscal shocks in one of the Euro Area members.

Paper on unorthodox transmission mechanisms

A theoretical paper on the various transmission mechanisms of budgetary policies across countries. The paper focuses on transmission mechanisms within a monetary union and during financial crises.

Research paper on Government Debt Deleveraging in the Eurozone

This paper studies the effects of a sharp reduction of the exogenous debt limit for some countries, which pushes them to deleverage, using DSGE model. It considers the welfare gains from central transfers to the countries that are hit by the deleveraging shock, financed by the union as a whole, as a test for government bailouts.

Policy report bringing together the lessons from the empirical and conceptual work.

This reports brings together the lessons from the empirical and conceptual work drawing out their policy implications.

Working paper on cross-country pension reform coordination

This paper uses a multi-country country overlapping generations model with intertemporal trade, imperfect labour markets and pay-as-you-go pension systems to study the spillover effects from population aging and pension reforms and the related need for policy coordination.

Data Management Plan

Data Management Plan detailing what data the project will generate, how it will be exploited and made accessible for verification and re-use, and how it will be curated and preserved.

Empirical paper on credit and equity market integration

This paper uses cross-border credit flows and bank level data (BANKSCOPE database) to investigate the role of credit and equity markets integration for risk sharing across countries.

Review of the literature on elements of fiscal union

This paper discusses the forms of fiscal risk sharing which have been advocated in the debate after the euro area crisis in order to define the contours and the content of a fiscal union for the EMU.

Working paper that uses stochastic simulations of the fiscal outcomes

Despite methodological improvements, uncertainty over the output gap will undoubtedly remain large. This paper uses a simulation model to analyse how the uncertainty affects optimal policy, and how the current minimum requirements comply with our findings.

Working paper on fiscal capacity

This paper studies the scope for a central EMU budget, taking into account the welfare effects of central government transfers following adverse shocks. It uses an open-economy discrete-time New Keynesian model with a continuum of countries.

Research paper on the impacts of different constellations of monetary and policy mix in the Euro Area following the global financial crisis

This paper studies the interaction between monetary and fiscal policies both empirically and using NIGEM. It investigates what constellation of the monetary and fiscal policies are optimal from the perspective of different needs of countries comprising the single currency block. It takes into account various monetary and fiscal policy restrictions (zero-bound and debt levels).

Progress Report

Progress Report reflecting the state of play of the project at month 24 to allow the Commission to assess progress in regards to objectives

Research report about the fiscal multipliers

This paper presents quantitative estimates of fiscal multipliers in individual members of the Euro Area using the National Institute’s global econometric model NiGEM. It also examines whether international coordination of fiscal policies strengthens or weakens the size of multipliers in individual countries.

Working paper on the MIP Scoreboard

The paper performs an in-depth ex-post analysis of the appropriateness of the indicators included in the MIP Scoreboard. We ask whether this system would have been able to effectively identify the potential macroeconomic imbalances if it had been applied before the financial crisis. The ex-post evaluation will include in some cases recalculation of the MIP Scoreboard which covers external imbalances, internal imbalances and competitiveness. The statistical analysis will cover each of the 28 member states.

Paper on in-depth case studies of the experience of fiscal coordination in selected countries

A paper describing in-depth case studies of the experience of fiscal coordination in selected countries. These case studies will make use of interviews with stakeholders as well as of data on the evolution of fiscal policy.

Research paper on potential transmission channels of macroprudential policy

This paper explores the potential role of macroprudential policies. It is based on an extensive analysis of the literature and empirical panel estimates of the relationships between selected instruments of macroprudential policy and financial stability and real economy variables.

Working paper on stochastic analysis of MTO-based fiscal policy rules

This paper uses a general equilibrium overlapping-generations model to study fiscal strategies where some tax of expenditure items are conditioned on observed and forecasted indebtedness and other fiscal variables. Specifically, we study a fiscal strategy for Finland that is explicitly based on the Medium-Term Objective defined in the preventive arm of the Stability and Growth Pact.

Working paper on medium-run stabilization potential of a EU central budget

This paper studies the potential stabilizing effects of an EU central budget using a multi-country overlapping generations (OLG) model. For comparison, we assume that the budget is used for transfers to government of countries hit by the largest shocks, or for transfers to all countries but in proportion to output per capita, or for transfers to all countries in proportion of public finance deficits.

Policy paper on how to adapt EU funds

This paper examines options for how we could modify Structural Funds and similar EU financial resources to make them better suited to medium-term ex post shock mitigation. These instruments are currently regulated and managed at the EU level in a way that is unrelated to fiscal coordination and disregarding the potential for emergency situations.

Report on the findings of the comparative analysis of the efficiency of the budgetary-monetary-financial policy mix in selected OECD countries

In order to understand the specific problems of macroeconomic conditions within the EMU, this paper examine the evolution of budgetary, monetary and financial performance indicators and provides a comparative analysis of the budgetary-monetary-financial policy mix in major OECD countries.

Working paper making comparisons between the requirements that countries face during the current crisis and historical examples of consolidations

This paper describes a simulation model that solves how much fiscal effort it takes to return legislative compliance under different assumptions about the initial state of the economy and the expected future economic development. The paper also uses the model to make comparisons between current requirements and historical examples of consolidations.

A research report highlighting the key implications of the FIRSTRUN results

This report highlights and explains the key policy conclusions from all FIRSTRUN research WPs. It includes an executive summary that briefly summarizes the key policy conclusions.

Working paper on the credibility of EU fiscal instruments

This paper uses an agency framework to consider the enforcement of desired fiscal policy as a dynamic game between Member States’ governments and EU authorities. Using the model, we retrospectively analyse the efficiency of the incentive schemes before and after the reforms in 2011.

A review paper elaborating the concepts of the expenditory state/deep variable

A review paper which elaborates the concepts of the expenditory state/deep variable and relates them to the progress of legitimacy and accountability proposals as part of the development of genuine economic and monetary union

Working paper on comparing unemployment insurance schemes

This paper compares alternative proposals for a central unemployment insurance systems. It empirically tests the relationship between the functioning and the size of alternative instruments and assesses their impact on output volatility and losses.

Briefing paper providing a readable summary of results for non-specialist readers

This briefing paper focuses on the lessons from the empirical and conceptual work.

Discussion paper on long-run spillover and coordination effects of fiscal policy reforms

This paper uses a multi-country OLG model to assess the spillover effects of national fiscal reforms. The paper also considers the potential need for policy coordination.

Research paper on the monetary-fiscal-macroprudential policy mix

This paper uses the extended NiGEM model to illustrate the monetary-fiscal-macroprudential policy mix in selected European countries.

Comparative paper on how fiscal rules are being interpreted in the Member States

A comparative paper on how fiscal rules are being interpreted in the Member States and how these interpretations affect the scope for effective fiscal policy coordination

Concise briefing paper

A concise briefing paper, providing a readable summary for non-specialist readers, of a brainstorming workshop, drawing on the results in D6.2

Literature review

A critical literature review of the various economic and political rationales for fiscal policy coordination. The literature review includes a classification of different type of fiscal spillovers and different forms of fiscal coordination.

Review paper on the current state of the art as regards the budgetary-monetary-financial policy mix

This paper examines the ways to ensure an appropriate balance of budgetary and monetary policy within and outside the EMU. It draws on previous theoretical and quantitative studies.

Empirical working paper with policy implications using deliverable 2.1

Using the new dataset (deliverable 2.1), this sub-task aims to empirically assess, through panel data analysis, whether and how the degree of uncertainty in forecasts is related to the business cycle and, in particular, if forecasts tend to be less reliable around turning points of the cycle, which is when accuracy would be most relevant.

Research paper on government debt, unconventional monetary policy and interest rate differentials

Following the global financial crisis, in the face of near zero interest rates, central banks turned to unconventional monetary policies and significantly expanded the size of their balance sheets. This paper studies the effects of such policies on interest rate differentials in Europe using a panel model approach.

An interactive web site and a Twitter account

The project websites provides continuously updated information on the progress of the project and the possibility to download reports and discuss with the partners.

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Publications

Beyond Brexit: Reshaping policies for regional development in Europe

Author(s): John Bachtler, Iain Begg
Published in: Papers in Regional Science, Issue 97/1, 2018, Page(s) 151-170, ISSN 1056-8190
DOI: 10.1111/pirs.12351

Fiscal and Other Rules in EU Economic Governance: Helpful, Largely Irrelevant or Unenforceable?

Author(s): Iain Begg
Published in: National Institute Economic Review, Issue 239/1, 2017, Page(s) R3-R13, ISSN 0027-9501
DOI: 10.1177/002795011723900110

The International Synchronisation of Business Cycles: the Role of Animal Spirits

Author(s): Paul De Grauwe, Yuemei Ji
Published in: Open Economies Review, Issue 28/3, 2017, Page(s) 383-412, ISSN 0923-7992
DOI: 10.1007/s11079-017-9434-3

Analysing the Relevance of the MIP Scoreboard's Indicators

Author(s): Domonkos Tomáš, Ostrihoň Filip, Šikulová Ivana, Širaňová Mária
Published in: National Institute Economic Review, Issue 239/1, 2017, Page(s) R32-R52, ISSN 0027-9501
DOI: 10.1177/002795011723900112

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

Author(s): Tero Kuusi
Published in: National Institute Economic Review, Issue 239/1, 2017, Page(s) R14-R31, ISSN 0027-9501
DOI: 10.1177/002795011723900111

ASSESSING MACROPRUDENTIAL TOOLS IN OECD COUNTRIES WITHIN A COINTEGRATION FRAMEWORK

Author(s): Oriol Carreras, E. Philip Davis, Rebecca Piggott
Published in: Journal of Financial Stability, 2018, ISSN 1572-3089
DOI: 10.1016/j.jfs.2018.04.004

Economic Policy and Surveillance in Europe: Introduction

Author(s): Simon Kirby
Published in: National Institute Economic Review, Issue 239/1, 2017, Page(s) R1-R2, ISSN 0027-9501
DOI: 10.1177/002795011723900109

The Stabilising Role of US Federal Fiscal Institutions — What Lessons for the Euro Area?

Author(s): Cinzia Alcidi, Gilles Thirion
Published in: Intereconomics, Issue 52/3, 2017, Page(s) 137-142, ISSN 0020-5346
DOI: 10.1007/s10272-017-0662-y

EMU and Sustainable Integration

Author(s): Iain Begg, Annette Bongardt, Kalypso Nicolaïdis, Francisco Torres
Published in: Journal of European Integration, Issue 37/7, 2015, Page(s) 803-816, ISSN 0703-6337
DOI: 10.1080/07036337.2015.1079375