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The identification of fiscal and macroeconomic imbalances - unexploited synergies under the strengthened EU governance framework

Author

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  • Rüffer, Rasmus
  • Leiner-Killinger, Nadine
  • Kamps, Christophe
  • Sondermann, David
  • De Stefani, Roberta

Abstract

In the light of the lessons learned from the euro area sovereign debt crisis, the EU fiscal and macroeconomic governance framework was overhauled in 2011. Against this background, this paper analyses whether the broadened surveillance of fiscal and macroeconomic indicators under the strengthened governance framework would have facilitated the identification of emerging imbalances, had it been in place before the crisis. The findings suggest that the strengthened governance framework would have given earlier signals about emerging excessive fiscal and macroeconomic imbalances. Euro area countries thus would have been obliged to take preventive and corrective action at an earlier stage, provided that the stricter rules had been effectively implemented. At the same time, the paper concludes that the increased reliance of the EU fiscal governance framework on unobservable magnitudes such as the structural budget balance, which are difficult to measure in real time, will continue to impede the timely identification of underlying fiscal imbalances. It is suggested that the new macroeconomic imbalance procedure could have given earlier indications about the emergence of excessive macroeconomic imbalances, which in turn posed risks for fiscal sustainability. Looking forward, these preliminary findings suggest possible synergies between the, until now largely unrelated, fiscal and macroeconomic governance frameworks. JEL Classification: H3, H6, E02, E61

Suggested Citation

  • Rüffer, Rasmus & Leiner-Killinger, Nadine & Kamps, Christophe & Sondermann, David & De Stefani, Roberta, 2014. "The identification of fiscal and macroeconomic imbalances - unexploited synergies under the strengthened EU governance framework," Occasional Paper Series 157, European Central Bank.
  • Handle: RePEc:ecb:ecbops:2014157
    Note: 343104
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    References listed on IDEAS

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    1. M. Katsimi, 2004. "Inflation divergence in the euro area: the Balassa-Samuelson effect," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 329-332.
    2. Laura Gonzalez Cabanillas & Alessio Terzi, 2012. "The accuracy of the European Commission's forecasts re-examined," European Economy - Economic Papers 2008 - 2015 476, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. van Riet, Ad, 2016. "Government Funding Privileges in European Financial Law : Making Public Debt Everybody's Favourite?," Discussion Paper 2016-045, Tilburg University, Center for Economic Research.
    2. Jose González Mínguez & Carmen Martínez Carrascal, 2019. "A crisis early warning model for euro area countries," Economic Bulletin, Banco de España;Economic Bulletin Homepage, issue DEC, pages 1-13.
    3. van Riet, Ad, 2016. "Safeguarding the euro as a currency beyond the state," Occasional Paper Series 173, European Central Bank.
    4. Ferdinandusse, Marien & Checherita-Westphal, Cristina & Attinasi, Maria Grazia & Lalouette, Laure & Bańkowski, Krzysztof & Palaiodimos, Georgios & Trindade Campos, Maria Manuel, 2017. "Euro area fiscal stance," Occasional Paper Series 182, European Central Bank.
    5. Pierluigi, Beatrice & Sondermann, David, 2018. "Macroeconomic imbalances in the euro area: where do we stand?," Occasional Paper Series 211, European Central Bank.
    6. Laurentiu Dumitru ANDREI & Petre BREZEANU, 2019. "Optimizing the Financial Structure of the State Treasury in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 180-195, June.

    More about this item

    Keywords

    Macroeconomic Imbalance Procedure; real-time potential output estimates; Stability and Growth Pact; structural balance;

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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