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

Titolo Rivista ECONOMIA PUBBLICA
Autori/Curatori Francesco Caprioli, Marzia Romanelli, Pietro Tommasino
Anno di pubblicazione 2020 Fascicolo 2020/1
Lingua Inglese Numero pagine 31 P. 55-85 Dimensione file 375 KB
DOI 10.3280/EP2020-001002
Il DOI è il codice a barre della proprietà intellettuale: per saperne di più clicca qui

Qui sotto puoi vedere in anteprima la prima pagina di questo articolo.

Se questo articolo ti interessa, lo puoi acquistare (e scaricare in formato pdf) seguendo le facili indicazioni per acquistare il download credit. Acquista Download Credits per scaricare questo Articolo in formato PDF

Anteprima articolo

FrancoAngeli è membro della Publishers International Linking Association, Inc (PILA)associazione indipendente e non profit per facilitare (attraverso i servizi tecnologici implementati da CrossRef.org) l’accesso degli studiosi ai contenuti digitali nelle pubblicazioni professionali e scientifiche

During the years of the so-called "Great Moderation", monetary policy and automatic stabilizers were deemed sufficient for counter-cyclical purposes. However, the depth and the length of the recent crisis, together with policy interest rates at the zero lower bound, induced a more positive re-assessment of a countercyclical fiscal stance, especially in the euro area. Against this background, we look at discretionary fiscal policy in the euro area from three different perspectives. First, we provide evidence that the discretionary fiscal policy in euro area countries has been mostly acyclical even if our estimates suggest that it could have been useful, particularly during the crisis. Second, focusing on the short-run - i.e. taking as given the economic and institutional constraints that currently make a significant fiscal expansion quite unrealistic in Europe - we discuss some budget-neutral proposals aimed at fostering economic growth. Finally, taking a more forward-looking perspective, we discuss the issue of the appropriate fiscal stance for the euro area as a whole, and argue that the advantages of having a coordinated approach (e.g. through a fiscal capacity at the central level) can be substantial.

Keywords:Discretionary fiscal policy; automatic stabilizers; European Monetary Union

Jel codes:E62, H87

  1. Andersen T.M. (1997). Fiscal Policy in the EMU and Outside. Swedish Economic Policy Review, 4: 235-275.
  2. Attinasi M.G., Prammer D., Stähler N., Tasso M., Van Parys S. (2016). Budgetneutral labour tax wedge reductions: A simulation-based analysis for selected euro area countries. Deutsche Bundesbank Discussion Papers N. 26.
  3. Auerbach A., Gorodnichenko Y. (2012). Measuring the Output Responses to Fiscal Policy. American Economic Journal: Economic Policy, 4(2): 1-27.
  4. Auerbach A., Gorodnichenko Y. (2013). Output Spillovers from Fiscal Policy. American Economic Review, 103: 141-46.
  5. Baiardi D., Profeta P., Puglisi R., Scabrosetti S. (2017). Tax Policy and Economic Growth: Does It Really Matter? CESifo Working Paper Series N. 6343.
  6. Bańkowski K. and Ferdinandusse M. (2017). Euro area fiscal stance. ECB Occasional Paper Series N. 182.
  7. Barro R.J. (1974). Are Government Bonds Net Wealth? Journal of Political Economy, 82(6): 1095-1117. DOI: 10.1086/260266
  8. Beetsma R.M.W.J., Jensen H. (2005). Monetary and fiscal policy interactions in a micro-founded model of a monetary union. Journal of International Economics, 67(2): 320-352.
  9. Beetsma R.M.W.J., Giuliodori M., Klaassen F. (2008). The effects of public spending shocks on trade balances and budget deficits in the European Union. Journal of the European Economic Association, 6(2-3): 414-423.
  10. Bénétrix A.S., Lane P.R. (2013). Fiscal cyclicality and EMU. Journal of International Money and Finance, 34(C): 164-176.
  11. Blanchard O., Perotti R. (2002). An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output. Quarterly Journal of Economics, 117(4): 1329-1368. DOI: 10.1162/003355302320935043
  12. Blanchard O., Erceg C.J., Lindé J. (2016). Jump Starting the Euro Area Recovery: Would a Rise in Core Fiscal Spending Help the Periphery?. NBER working paper N. 21426.
  13. Blinder A.S. (2006). The Case Against the Case Against Discretionary Fiscal Policy.
  14. In: Kopcke R.W., Tootell G.M.B., Triest R.K. (eds.). The Macroeconomics of Fiscal Policy. Cambridge, Mass.: MIT Press.
  15. Burriel P., de Castro F., Garrote D., Gordo E., Paredes J., Pérez, J.J. (2010). Fiscal Policy Shocks in the Euro Area and the US: An Empirical Assessment. Fiscal Studies, 31(2): 251-285.
  16. Callegari G., Melina G., Batini N. (2012). Successful Austerity in the United States, Europe and Japan. IMF Working Papers N. 12/190.
  17. Calmfors L. (1998). Macroeconomic Policy, Wage Setting, and Employment – What Difference Does the EMU Make?. Oxford Review of Economic Policy, 14(3): 125-151.
  18. Canova F., Pappa E. (2007). Price differential in monetary unions: the role of fiscal shocks. Economic Journal, 117(520): 713-737.
  19. Caprioli F., Momigliano S. (2011). The Effects of Fiscal Shocks with Debt-Stabilizing Budgetary Policies in Italy. Banca d’Italia, Temi di Discussione, No. 839.
  20. Christiano L.J., Eichenbaum M., Rebelo S. (2011). When Is the Government Spending Multiplier Large? Journal of Political Economy, 119(1): 78-121. DOI: 10.1086/659312
  21. Corsetti G., Meier A., Müller G.J. (2010). Cross-Border Spillovers from Fiscal Stimulus, International Journal of Central Banking, 6(1): 5-37.
  22. Cwik T., Wieland V. (2011). Keynesian government spending multipliers and spillovers in the euro area. Economic Policy, 26(67): 493-549.
  23. de Grauwe P., Ji Y. (2013). Self-fulfilling crises in the Eurozone: An empirical test. Journal of International Money and Finance, 34: 15-36.
  24. DeLong J.B., Summers L.H. (2012). Fiscal Policy in a Depressed Economy. Brookings Papers on Economic Activity, 43(1): 233-297.
  25. de Mooij R., Keen M. (2012). Fiscal devaluation and fiscal consolidation: the VAT in troubled times. NBER Working Paper N. 17913.
  26. Dixit A., Lambertini L. (2003). Symbiosis of monetary and fiscal policies in a monetary union. Journal of International Economics, 60(2): 235-247.
  27. Edelberg W., Eichenbaum M., Fisher J. (1999). Understanding the Effects of a Shock to Government Purchases. Review of Economic Dynamics, 2(1): 166-206.
  28. Engler P., Ganelli G., Tervala J., Voigts S. (2014). Fiscal Devaluation in a Monetary Union. IMF working papers N. 14/201.
  29. European Central Bank (2017). The composition of public finances in the Euro area. ECB Economic Bulletin, 5.
  30. European Commission (2013). Study on the Impacts of Fiscal Devaluation. Taxation Papers N. 36.
  31. European Commission (2014). Quarterly report on the euro area, 13(4).
  32. European Commission (2016). The fiscal stance in the euro area: methodological issues. In: European Commission (ed). Report on Public finances in EMU 2016.
  33. Farhi E., Gopinath G., Itskhoki O. (2014). Fiscal Devaluations. The Review of Economic Studies, 81(2): 725-760.
  34. Fatás A., Mihov I. (2001). The Effects of Fiscal Policy on Consumption and Employment: Theory and Evidence. CEPR Discussion Papers N. 2760.
  35. Fatás A., Mihov I. (2010). The Euro and Fiscal Policy. In: Alesina A., Giavazzi, F. (eds), The First Ten Years of the Euro, University of Chicago Press, Chicago, Ill.
  36. Fatás A., Mihov I. (2012). Fiscal Policy as a Stabilization Tool. B.E. Journal of Macroeconomics, 12(3): 1-68. DOI: 10.1515/1935-1690.113
  37. Favero C., Giavazzi, F., Perego J. (2011). Country Heterogeneity and the International
  38. Evidence on the Effects of Fiscal Policy. IMF Economic Review, 59(4): 652-682.
  39. Furman J. (2016). The New View of Fiscal Policy and Its application. Remarks to the Conference “Global Implications of Europe’s Redesign”, New York.
  40. Galì J., Perotti R. (2003). Fiscal Policy and Monetary Integration in Europe. Economic Policy. 18: 533-572. DOI: 10.1111/1468-0327.00115_1
  41. Galì J., Monacelli T. (2008). Optimal monetary and fiscal policy in a currency union. Journal of International Economics, 76(1): 116-132.
  42. Giavazzi F., Pagano M. (1990). Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries. In: Blanchard O., Fischer S. (eds).
  43. NBER Macroeconomics Annual 1990, MIT press.
  44. Giordano R., Pericoli M., Tommasino P. (2013). Pure or Wake-up-Call Contagion? Another Look at the EMU Sovereign Debt Crisis. International Finance, 16(2): 131-160.
  45. Golinelli G., Momigliano S. (2009). The Cyclical Reaction of Fiscal Policies in the Euro Area: The Role of Modelling Choices and Data Vintages. Fiscal Studies, 30(1): 39-72.
  46. Golinelli G., Mammi I., Momigliano S., Rizza P. (2017). The Cyclicality of Fiscal Policy in the Euro Area over the Crisis. In: Banca d’Italia, Proceedings of the 19th Workshop on Public Finance.
  47. Gomes S., Jacquinot P., Pisani M. (2012). The EAGLE. A model for policy analysis of macroeconomic interdependence in the euro area. Economic Modelling, 29(5): 1686-1714.
  48. Gomes S., Jacquinot P., Pisani M. (2016). Fiscal devaluation in the euro area: A model-based analysis. Economic Modelling, 52: 58-70.
  49. Goujard A. (2017). Cross-country Spillovers from Fiscal Consolidations. Fiscal studies, 38(2): 219-267. DOI: 10.1111/1475-5890.12096
  50. Hebous S., Zimmermann T. (2013). Estimating the effects of coordinated fiscal actions in the euro area. European Economic Review, 58: 110-121.
  51. Ilzetzki E., Mendoza E.G., Vegh C.A. (2013). How Big (Small?) Are Fiscal Multipliers?”. Journal of Monetary Economics, 60(2): 239-54.
  52. IMF (2016). Euro area policies, Staff report for the 2016 article IV consultation. in’t Veld J. (2013). Fiscal consolidations and spillovers in the Euro area periphery and core. European Economy – Economic Papers N. 506.
  53. Kaplan G, Violante G.L, Weidner J. (2014). The Wealthy Hand-to-Mouth, Brookings Papers on Economic Activity, 45(1): 77-153.
  54. Keynes J.M. (1931), Addendum I to: Great Britain, Committee on Finance and Industry Report London, His Majesty’s Stationery Office.
  55. Kirsanova T., Wren-Lewis S. (2012). Optimal Fiscal Feedback on Debt in an Economy with Nominal Rigidities. Economic Journal, 122(559): 238-264.
  56. Krugman, P. (2005), “Is Fiscal Policy Poised for a Comeback?”, Oxford Review of Economic Policy, vol. 21 (4), pp. 515-523.
  57. Leeper E.M., Walker T.B., Yang S.S. (2010). Government investment and fiscal stimulus. Journal of Monetary Economics, 57(8): 1000-1012.
  58. Lipinska A.,von Thadden L. (2012). On the (in)effectiveness of fiscal devaluations in a monetary union. Board of Governors of the Federal Reserve System, Finance and Economics Discussion Series N. 2012-71.
  59. Mountford A., Uhlig H. (2002). What Are the Effects of Fiscal Policy Shocks?. CEPR, Discussion Paper N. 3338.
  60. OECD (2016). OECD Economic Surveys: Euro Area 2016. Paris: OECD.
  61. Perotti R. (2004). Estimating the effects of fiscal policy in OECD countries. IGIER Working Papers N. 276.
  62. Romer C., Romer D. (2010). The macroeconomic effects of tax changes: estimates based on a new measure of fiscal shocks. American Economic Review, 100(3): 763-801.
  63. Sargent T.J., Wallace N. (1981). Some unpleasant monetarist arithmetic. Federal Reserve Bank of Minneapolis Quarterly Review, 5: 1-17.
  64. Sims D., Zha T. (2006). Does Monetary Policy Generates Recessions?. Macroeconomics Dynamics, 10(2): 231-272.
  65. Stähler N., Carlos T. (2012). FiMod – A DSGE model for fiscal policy simulations. Economic Modelling, 29(2): 239-261.
  66. Taylor J.B. (2000). Reassessing Discretionary Fiscal Policy. Journal of Economic Perspective, 14(3): 21-36.

  • The future of European fiscal governance: a comprehensive approach Marzia Romanelli, Pietro Tommasino, Emilio Vadalà, in SSRN Electronic Journal /2022
    DOI: 10.2139/ssrn.4109512

Francesco Caprioli, Marzia Romanelli, Pietro Tommasino, Discretionary fiscal policy in the Euro area: Past, present and future in "ECONOMIA PUBBLICA " 1/2020, pp 55-85, DOI: 10.3280/EP2020-001002