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Fiscal Sustainability in the Presence of Systemic Banks: the Case of EU countries

Author

Listed:
  • Agnès Bénassy-Quéré

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Guillaume Roussellet

    (ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique, Centre de recherche de la Banque de France - Banque de France, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

We provide a first attempt to include off-balance sheet, implicit insurance to SIFIs into a consistent assessment of fiscal sustainability, for 27 countries of the European Union. We first calculate tax gaps à la Blanchard (1990) and Blanchard et al. (1990). We then introduce two alternative measures of implicit off-balance sheet liabilities related to the risk of a systemic bank crisis. The first one relies on microeconomic data at the bank level. The second one is based on econometric estimations of the probability and the cost of a systemic banking crisis. The former approach provides an upper evaluation of the fiscal cost of systemic banking crises, whereas the latter one provides a lower one. Hence we believe that the combined use of these two methodologies helps to gauge the range of fiscal risk.

Suggested Citation

  • Agnès Bénassy-Quéré & Guillaume Roussellet, 2014. "Fiscal Sustainability in the Presence of Systemic Banks: the Case of EU countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00825256, HAL.
  • Handle: RePEc:hal:cesptp:hal-00825256
    DOI: 10.1007/s10797-013-9273-0
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    1. repec:hal:journl:dumas-00909907 is not listed on IDEAS
    2. Lihe Tu & Emanuele Padovani, 2018. "A Research on the Debt Sustainability of China’s Major City Governments in Post-Land Finance Era," Sustainability, MDPI, Open Access Journal, vol. 10(5), pages 1-21, May.
    3. Paola Bongini & Laura Nieri, 2014. "Identifying and Regulating Systemically Important Financial Institutions," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 43(1), pages 39-62, February.
    4. Jack Bekooij & Jon Frost & Remco van der Molen & Krzysztof Muzalewski, 2016. "Hazardous tango: Sovereign-bank interdependencies across countries and time," DNB Working Papers 541, Netherlands Central Bank, Research Department.
    5. A. Ahmad & Su-ling Fanelli, 2014. "Fiscal Sustainability in the Euro-Zone: Is There A Role for Euro-Bonds?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(3), pages 291-303, September.
    6. Gruber, Alexander & Kogler, Michael, 2016. "Banks and Sovereigns: A Model of Mutual Contagion," Economics Working Paper Series 1614, University of St. Gallen, School of Economics and Political Science.
    7. Alina Cristina NUTA & Rodica PRIPOAIE & Florian Marcel NUTA, 2014. "Fiscal Policy In And After Crises," Journal of Public Administration, Finance and Law, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 0(Special i), pages 92-95, September.
    8. Mikhail Stolbov, 2014. "How Are Interbank and Sovereign Debt Markets Linked? Evidence from 14 OECD Countries, the Euro Area and Russia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(3), pages 331-348, June.

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    More about this item

    Keywords

    fiscal sustainability; tax gap; systemic banking risk; off-balance sheet liabilities;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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