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This paper analyzes the impact of decentralization on overall fiscal performance in the European Union, taking into account fiscal institutional arrangements. We find that spending decentralization has been associated with sizably better fiscal performance, especially when transfer dependency of subnational governments is low. However, subnational fiscal rules do not seem to be associated with better performance

This paper employs fifteen dynamic macroeconomic models maintained within the European System of Central Banks to assess the size of fiscal multipliers in European countries. Using a set of common simulations, we consider transitory and permanent shocks to government expenditures and different taxes. We investigate how the baseline multipliers change when monetary policy is transitorily constrained by the zero nominal interest rate bound, certain crisis-related structural features of the economy such as the share of liquidity-constrained households change, and the endogenous fiscal rule that ensures fiscal sustainability in the long run is specified in terms of labour income taxes instead of lump-sum taxes. ; N/A

Using a DSGE model calibrated to the euro area, we analyze the international effects of afiscal devaluation (FD) implemented as a revenue-neutral shift from employer's socialcontributions to the Value Added Tax. We find that a FD in 'Southern European countries'has a strong positive effect on output, but mild effects on the trade balance and the realexchange rate. Since the benefits of a FD are small relative to the divergence incompetitiveness, it is best addressed through structural reforms

The book discusses optimal fiscal policy for an internationally integrating economy when public borrowing is constrained. Various innovations have been introduced: the agglomeration effect, the fiscal solvency concept, the harmonization of capital income tax base with formula apportionment and transaction tax on financial transactions. Tax structure consists of taxes on labor, capital and consumption, and bonds - the study looks at equilibrium tax rates under international tax competition pressure, and estimates them econometrically. It also offers policy recommendations as a contribution to t

Using real-time data, we examine whether fiscal policy has been counter- or procyclical in a panel of 27 European Union (EU) member states over the period 2000–2015. We also investigate whether fiscal rules and government efficiency improve the cyclical reaction of fiscal policy. Our results suggest that even though fiscal plans in EU countries have an acyclical stance, budgetary outcomes are procyclical. Government efficiency and fiscal rules seem to reduce fiscal procyclicality. Further analysis also reveals that fiscal policy seems to be more procyclical in non-euro area countries and in times of economic prosperity.

This paper assesses the relative strengths and weaknesses of fiscal institutions in ten Southeastern European countries, using recent benchmarking methodologies developed by FAD. The assessment evaluates each country's understanding of the scale of the fiscal adjustment challenge, its ability to develop a credible consolidation strategy, and its capacity to implement the strategy. Key institutional arrangements, are generally in place, including top-down budgeting and medium-term budget frameworks. Other institutional arrangements require further attention, including macro-fiscal forecasting

Introduction Fiscal Federalism in the European Union: How Far Are We?-- R.H.Alves and O.Afonso Is there Compatibility between the Stability and Growth Pact and Automatic Fiscal Stabilisers?-- S.Rostaing-Paris Stabilization Capacity and Fiscal Policy in EMU-- J.U.Gonzalez and M.J.A.Fernandez Fiscal Adjustment and Composition of Public Expenditures in EMU-- J.Ferreiro, M.T.Garcia-del-Valle and C.Gomez Public Capital and Economic Growth: An Empirical Spurious Link?-- G.Poilon Has France Become a Deficit Running Country?-- J.Creel, G.Gilbert and T.Madies How to Deal with Economic Divergences in EMU?-- C.Mathieu and H.Sterdyniak A Scheme to Coordinate Monetary and Fiscal Policies in the Euro Area-- C.Panico and M.V.Suarez

This paper analyzes empirically the impact of fiscal policy on the price level for the casesof Germany and Spain. We investigate whether the fiscal theory of the price level (FTPL) is able to deliver a reasonable explanation for the different performances of the price level in these two countries during recent years. We apply two different approaches. The first is a Bayesian VAR model using sign restrictions to assess the relation between surpluses and public debt. Afterwards, we use a Bayesian regime-switching model to uncover changes inmonetary and fiscal policy behavior. The analysis basically shows that in each of the two countries fiscal shocks have a significant impact on the price level. Nonetheless, the FTPL does not deliver a reasonable explanation for the differences in the pattern of inflation between the two countries.

This paper analyzes empirically the impact of fiscal policy on the price level for the cases of Germany and Spain. We investigate whether the fiscal theory of the price level (FTPL) is able to deliver a reasonable explanation for the different performances of the price level in these two countries during recent years. We apply two different approaches. The first is a Bayesian VAR model using sign restrictions to assess the relation between surpluses and public debt. Afterwards, we use a Bayesian regime-switching model to uncover changes in monetary and fiscal policy behavior. The analysis basically shows that in each of the two countries fiscal shocks have a significant impact on the price level. Nonetheless, the FTPL does not deliver a reasonable explanation for the differences in the pattern of inflation between the two countries.

For a number of countries - Italy, Netherlands, the United Kingdom, Germany, Ireland, and France - this paper develops an inter-temporal model that elicits the implied country-preferences over balancing the conflicting objectives of fiscal consolidation and reduction of economic slack. The model suggests that some front-loading of adjustment is desirable, although the extent would vary by country preferences. It also finds that proposed consolidations may prove to be stronger than acceptable, especially if somewhat larger than anticipated fiscal multipliers lead to a sizeable economic decelera

The efforts of politicians in power to affect the decisions of voters through expansive fiscal policies in pre-election periods are still topical. This article determines whether governments in European Union countries initiate the political-budget cycle. We analyse 23 EU member states in the period 1995–2008. We pay attention to four institutional factors that can contribute to the creation of the political-budget cycle: length of democracy, type of parliamentary election, term of election and ideology. We find that the political-budget cycle was present throughout European Union countries in this period. The factor of the length of democracy had a small impact on the statistical significance of the results. However, ideology turned out to be the most important factor in our analysis. Current revenues were used as a tool of fiscal policy in the years of elections predominantly by ideologically mixed governments. Left-wing governments used rather the expenditure side of the budget to win the favour of the electorate. The type of election (regular or early) became relevant only in specific cases and in combination with other institutional factors. Finally, the new EU member governments consider the spring or autumn term of the election as a criterion co-determining their pre-election fiscal policies.