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Euro Area Fiscal Policy Changes: Stylised Features of the Past Two Decades

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  • Cláudia Braz
  • Nicolas Carnot

Abstract

The paper provides a narrative of euro area fiscal policy changes since 1997, the year when Maastricht criteria were met for inception of the euro. Changes in the budget balance are decomposed into a discretionary component, a cyclical component and a net residual, with each component broken down in turn into broad categories of expenditure and revenues. The paper then examines the output effects of fiscal changes. We summarise our findings in six stylised features. In brief, fiscal changes and fiscal effects are relatively large. They stem in similar proportions from discretionary actions and from the automatic stabilisers. Discretionary changes tend to involve both revenue and expenditure measures and do not appear systematically driven by cyclical developments. Fiscal changes as a whole have contributed to smooth the euro area growth path, but mostly due to the automatic stabilisers.

Suggested Citation

  • Cláudia Braz & Nicolas Carnot, 2019. "Euro Area Fiscal Policy Changes: Stylised Features of the Past Two Decades," European Economy - Discussion Papers 2015 - 109, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:dispap:109
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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