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Some Stylized Facts on Non-Systematic Fiscal Policy in the Euro Area

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Marcellino, Massimiliano

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Abstract

We derive a set of stylized facts on the effects of non-systematic fiscal policy in the four largest countries of the Euro area, and discuss their implications for the fiscal policy coordination debate, for the effectiveness of fiscal shocks in stabilizing the economies, and for the interaction of fiscal and monetary policy. We find relevant differences across countries in the effects of non-systematic fiscal policy, and substantial uncertainty about the size of these effects, which casts doubts on the possibility of a fiscal coordination. Moreover, expenditure shocks are usually rather ineffective in increasing output growth or reducing its volatility, and can require deficit financing. Tax policies also appear to have minor effects on output, and tax cuts could also require deficit financing. Finally, fiscal shocks appear to have an impact on interest rates, either direct or through the output gap and inflation while, in general, the effects of monetary policy on disbursements and receipts seem to be minor.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3635.

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Date of creation: Nov 2002
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Handle: RePEc:cpr:ceprdp:3635

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Related research
Keywords: fiscal policy; monetary policy; policy coordination; stabilization policy;

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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References listed on IDEAS
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    Other versions:
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  3. Favero, Carlo A & Marcellino, Massimiliano, 2001. "Large Datasets, Small Models and Monetary Policy in Europe," CEPR Discussion Papers 3098, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Favero, Carlo A, 2002. "How do European Monetary and Fiscal Authorities Behave?," CEPR Discussion Papers 3426, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Roberto Perotti, 2002. "Estimating the effects of fiscal policy in OECD countries," Economics Working Papers 015, European Network of Economic Policy Research Institutes. [Downloadable!]
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  7. Craig Burnside & Martin Eichenbaum & Jonas D.M. Fisher, 2000. "Assessing the Effects of Fiscal Shocks," NBER Working Papers 7459, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Valerie A. Ramey & Matthew D. Shapiro, 1999. "Costly Capital Reallocation and the Effects of Government Spending," NBER Working Papers 6283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall. [Downloadable!]
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  14. Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1399-1436, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Philipp C. Rother, 2004. "Fiscal policy and inflation volatility," Working Paper Series 317, European Central Bank. [Downloadable!]
  2. jerome henry & sandro momigliano & pablo hernandez de cos, 2005. "The short-term impact of government budgets on prices Evidence from macroeconometric models," Macroeconomics 0501020, EconWPA. [Downloadable!]
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  3. António Afonso & Peter Claeys, 2006. "The dynamic behaviour of budget components and output – the cases of France, Germany, Portugal, and Spain," Working Papers 2006/26, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  4. Francisco de Castro, 2006. "The macroeconomic effects of fiscal policy in Spain," Applied Economics, Taylor and Francis Journals, vol. 38(8), pages 913-924, May. [Downloadable!] (restricted)
    Other versions:
  5. Francisco de Castro & Pablo Hernández de Cos, 2006. "The economic effects of exogenous fiscal shocks in Spain: a SVAR approach," Working Paper Series 647, European Central Bank. [Downloadable!]
    Other versions:
  6. Peter CLAEYS, 2004. "Monetary and budgetary policy interaction: an SVAR analysis of stabilisation policies in monetary union," Economics Working Papers ECO2004/22, European University Institute. [Downloadable!]
  7. Peter Claeys & Rosina Moreno & Jordi Suriñach, 2008. "Fiscal policy and interest rates: the role of financial and economic integration," IREA Working Papers 200810, University of Barcelona, Research Institute of Applied Economics, revised Sep 2008. [Downloadable!]
  8. Jérôme Henry & Pablo Hernández de Cos & Sandro Momigliano, 2004. "The short-term impact of government budgets on prices: evidence from macroeconomic models," Working Paper Series 396, European Central Bank. [Downloadable!]
  9. Giuseppe de Arcangelis & Serena Lamartina, 2003. "Identifying fiscal shocks and policy regimes in OECD countries," Working Paper Series 281, European Central Bank. [Downloadable!]
  10. Hasko, Harri, 2007. "‘Some unpleasant fiscal arithmetic’: the role of monetary and fiscal policy in public debt dynamics since the 1970s," Research Discussion Papers 28/2007, Bank of Finland. [Downloadable!]
  11. Massimo Giuliodori & Roel Beetsma, 2005. "What are the Trade Spill-Overs from Fiscal Shocks in Europe? An Empirical Analysis**," De Economist, Springer, vol. 153(2), pages 167-197, 06. [Downloadable!] (restricted)
  12. Roel Beetsma & Massimo Giuliodori & Franc Klaassen, 2005. "Trade Spillovers of Fiscal Policy in the European Union: A Panel Analysis," DNB Working Papers 052, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  13. Antonio Afonso & Peter Claeys, 2007. "The dynamic behaviour of budget components and output," Working Paper Series 775, European Central Bank. [Downloadable!]
    Other versions:
  14. Xavier Ramos & Oriol Roca-Sagales, 2007. "Long Term Effects of Fiscal Policy on the Size and the Distribution of the Pie in the UK," RSCAS Working Papers 2007/39, European University Institute. [Downloadable!]
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