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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," Working Papers w201910, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w201910
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    References listed on IDEAS

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    Cited by:

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    2. Bańkowski, Krzysztof, 2023. "Fiscal policy in the semi-structural model ECB-BASE," Working Paper Series 2802, European Central Bank.
    3. Cláudia Braz & Maria Manuel Campos, 2021. "Challenges in measuring fiscal effects," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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