Public Debt and Long-Term Interest Rates: The Case of Germany, Italy and the USA
In: ECB Working Paper No. 656
In: ECB Working Paper No. 656
SSRN
In Lisbon the European Council proclaimed a European growth strategy. It considers an average economic growth rate of around 3 percent as a realistic prospect for the coming years and assigns public finances an important role in the process of achieving this goal. This paper addresses the question whether we can find empirical evidence for European countries that public finance reform affects trend growth. Focusing on time series patterns, we investigate whether there have been persistent shifts or trends in economic growth and fiscal variables over the last 40 years. In addition, we estimate a distributed lag model, which 1) indicates that government consumption and transfers negatively affect growth rates of GDP per capita over the business cycle, while public investment has a positive impact, and 2) provides robust evidence that distortionary taxation affects growth in the medium-term through its impact on the accumulation of private physical capital.
BASE
In: Public choice, Band 109, Heft 3, S. 327-346
ISSN: 0048-5829
In: Public choice, Band 109, Heft 3-4, S. 327-346
ISSN: 0048-5829
Recent research has demonstrated the importance of good quality of fiscal adjustments for the success of government budget consolidations. We extend this approach to analyze the importance of the economic conditions in which fiscal consolidations are started for their success. The cyclical positions of the domestic & international economy, the initial debt level, & the stance of fiscal policy in the OECD are all important determinants of the likelihood of fiscal consolidations. They also affect the government's choice of consolidation strategy, making them important determinants of the success of fiscal consolidations. In contrast, the monetary policy stance plays only a negligible role for fiscal consolidations. The authors use the analysis to test for any Maastricht effects on the performance of European governments during the 1990s. Such effects are weak at best & occurred only during the first half of the decade. 9 Tables, 13 References. Adapted from the source document.
German public finances are currently subject to considerable changes in the macro-economic environment and this is probably only the beginning of more far-reaching developments in the future. Like many other European countries, Germany, on the one hand, faces the fiscal problems emerging from an ageing population, which will put upward pressure on social security expenditures. On the other hand, the public will reject an increase of the already high tax burden and an increasingly globalized economy and further European integration may put an additional limit on the government's capability to raise additional revenues. Finally, German governments will have to show whether they are able to meet these conflicting challenges in the future within the fiscal framework set by the Maastricht Treaty and the Stability and Growth Pact. Therefore, continued debt accumulation does not seem to be a viable option to circumvent the ageing problem and the limit on taxation. Thus we see three challenges for German public finances in the future. In this paper, we develop the recent history of German fiscal policy as a background to judging how fit Germany is to meet these challenges. Our main focus is on the government's fiscal strategies and the gradual erosion of the institutions that secured Germany's fiscal stability in the past.
BASE
In: Cambridge studies in comparative politics
1 -- Introduction 2 -- Electoral and Fiscal Institutions and Forms of Fiscal Governance 3 -- An Account of Fiscal Norms and Rules in the European Union from 1985 To 2004 4 -- How Forms of Fiscal Governance Affect Fiscal Performance 5 -- Why do Countries Have Different Fiscal Institutions? 6 -- Institutional Choice in New Democracies: Fiscal Governance in Central and East European Countries 7 -- Emu and Fiscal Governance in Europe 8 -- Conclusion.
In: Cambridge studies in comparative politics
This book presents a theoretical framework to discuss how governments coordinate budgeting decisions. There are two modes of fiscal governance conducive to greater fiscal discipline, a mode of delegation and a mode of contracts. These modes contrast with a fiefdom form of governance, in which the decision-making process is decentralized. An important insight is that the effectiveness of a given form of fiscal governance depends crucially upon the underlying political system. Delegation functions well when there are few, or no, ideological differences among government parties, whereas contracts are effective when there are many such differences. Empirically, delegation and contract states perform better than fiefdom states if they match the underlying political system. Additional chapters consider why countries have the fiscal institutions that they do, fiscal governance in Central and Eastern Europe, and the role of such institutions in the European Union
In: European journal of political economy, Band 23, Heft 2, S. 338-359
ISSN: 1873-5703
This paper uses a new data set on budgetary institutions in Europe to examine the impact of fiscal rules and budget procedures in EU countries on public finances. It briefly describes the main pattern of budgetary institutions and their determinants across the EU 15 member states. Empirical evidence for the time period 1985-2004 suggests that the centralisation of budgeting procedures restrains public debt. In countries with one-party governments or coalition governments where parties are closely aligned and where political competition among them is low, this is achieved by the delegation of decision-making power to the minister of finance. Fiscal contracts that require countries to set multi-year targets and that reinforce those targets increase fiscal discipline in countries with ideologically dispersed coalitions and where parties regularly compete against each other.
BASE
We analyse the performance of budgetary and growth forecasts of all stability and convergence programmes submitted by EU member states over the last decade. Differences emerge for the bias in budgetary projections across countries. As a second step we explore whether economic, political and institutional factors can explain this pattern. Our analysis indicates that the cyclical position and the form of fiscal governance are major determinants of forecast biases. Projected changes in the budgetary position are mainly affected by the cycle, the need of convergence before EMU and by electoral cycles.
BASE
This paper examines the development of fiscal rules and budget procedures in EU countries, and their impact of public finances since the mid-1980s. It presents a new data set on institutional reforms and their impact in Europe. Empirical pattern confirm our prediction that more stringent fiscal rules exist under large coalition governments, while the centralisation of budgetary procedures is the main form of fiscal governance elsewhere. In addition, the centralisation of procedures does not restrain public debt in countries more prone to a rules-based approach, whereas more stringent fiscal rules seem to support fiscal discipline in almost all EU countries.
BASE
In: ZEI working paper / ZEI, B 02-19
World Affairs Online
In: ZEI Working Paper, B5/1999
World Affairs Online
In: Occasional paper series 83
In: ZEI Working Paper, B 13/2001
World Affairs Online