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

  • Agnès Bénassy-Quéré


    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)

  • Guillaume Roussellet


    (ENSAE - École Nationale de la Statistique et de l'Administration Économique - ENSAE ParisTech)

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 of microeconomic data at the bank level. The second one relies on econometric estimations of the probability and the cost of a systemic banking crisis, based on historical data. 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.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00755705.

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Date of creation: Nov 2012
Date of revision:
Publication status: Published in Documents de travail du Centre d'Economie de la Sorbonne 2012.77 - ISSN : 1955-611X. 2012
Handle: RePEc:hal:cesptp:halshs-00755705
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