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  • E62
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  • 1
    Publication Date: 2019-05-08
    Description: Fiscal policymakers are expected to conduct countercyclical policies to mitigate cyclical fluctuations of output, but the assessment of cyclical conditions in real time is subject to considerable uncertainty. They face two types of risk: (i) launching discretionary measures to support or dampen aggregate demand when no measures are required (type I error), or (ii) not launching any stabilising measures when this is warranted by cyclical conditions (type II error). A rational policymaker could manage these risks by correcting real-time estimates for past errors, notably the apparent tendency to underestimate good times when they occur. In practice, however, fiscal policy has been largely pro-cyclical or a-cyclical at best. Using statistical decision theory, we calculate thresholds for realtime output gap estimates beyond which governments could launch stabilisation measures, so as to reduce the risk of running pro-cyclical policies. We consider different preferences for avoiding type I or type II errors, and for addressing upside and downside growth risks. We show that the tendency to run pro-cyclical fiscal policy and the ensuing deficit bias can reflect two factors: a preference for activism that is, attaching a lower cost to type I errors, combined with an inclination to be gloomy about cyclical conditions.
    Keywords: E62 ; E63 ; H68 ; ddc:330 ; fiscal stabilisation ; pro-cyclical fiscal policy ; risk management ; real-time output gap estimates
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 2
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    Kiel: Kiel Institute for the World Economy (IfW)
    Publication Date: 2019-05-09
    Description: We investigate the impact of errors in medium run tax revenue forecasts on the final budget balance. Our analysis is based on fiscal data for the entirety of German states and takes advantage of revenue forecasts and respective errors that can be considered as exogenously given in the budgeting process. We find that forecast errors at various forecast horizons translate considerably into the final budget balance, indicating that expenditure plans get only marginally adjusted when revenue forecasts get revised. Consequently, the accuracy of medium run forecasts considerably affects the sustainability of public finances. Our calculations suggest that a significant share of total debt of German states results from revenue forecasts that were too optimistic.
    Keywords: E62 ; H61 ; H68 ; ddc:330 ; fiscal policy ; fiscal planning ; medium run forecasting ; budget balance ; public debt
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 3
    Publication Date: 2019-03-01
    Description: We analyze data from an author-conducted survey of members of the French and German parliaments on European Monetary Union reform preferences. We consider three potential drivers of preferences: nationality, ideology, and personal characteristics. For European Monetary Union policies like Eurobonds, the Fiscal Compact and the European Central Bank asset purchase program we find a robust difference between parliamentarians of both countries if they belong to the same party family and controlling for individual characteristics. Based on our estimates, however, we predict agreement between German left-wingers and French conservatives even for ideological differences that are smaller than the current difference between the left and the right European party families. Our findings suggest that deeply-rooted national differences do not impose a prohibitive obstacle to a German-French parliamentary consensus on European Monetary Union policies.
    Description: This Version: February 12, 2019
    Keywords: E60 ; E62 ; F15 ; H60 ; ddc:330 ; Comparative politics ; European Monetary Union reforms ; elite survey ; members of national ; parliament ; policy preferences
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 4
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    Toronto, Ontario: The Bichler and Nitzan Archives
    Publication Date: 2019-03-14
    Description: FROM THE NOTE: This week, with the Federal Reserve Banks of New York and Atlanta anticipating sharply lower GDP growth for 2019:Q1, President Trump presented a ‘Budget for A Better America’, calling for a smaller government and a bigger military. Forty years ago, the very same call was hailed as the best recipe for renewed growth. The U.S. ruling class was getting ready to install Ronald Reagan as President, abandon the Cold War and embark on neoliberalism, and it argued that, for that shift to succeed, the country needed a leaner government in order to unleash its entrepreneurial spirit and crowd-in private investment, and that it required a strong military in order to boost its global muscle and open world markets for its products and capital. Ideology aside, one key reason for the growth optimism of the time was rising military spending…
    Keywords: L64 ; E62 ; P16 ; D74 ; ddc:330 ; economic growth ; military spending
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 5
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    Kiel, Hamburg: ZBW – Leibniz Information Centre for Economics
    Publication Date: 2019-04-27
    Description: Models of political budget cycles assume that politicians use fiscal policy to increase their chances of re-election. However, empirical results for advanced economies provide ambiguous support for the existence of such electoral cycles. Also, studies focusing on the regional or local level of advanced economies have found a variety of different results. In this paper, we use data at the sub-federal level of Switzerland from 1978 through 2015 to test for the presence of political budget cycles. Swiss regions called cantons are highly autonomous with regard to budgetary policy and have established direct democratic systems with frequent referendums that often affect budgetary issues. In most cantons, there are fiscal policy rules that restrict the budgetary leeway of governments. Overall, the system of government is designed to foster consensus seeking and gradual adjustment. These features should make the short-run opportunistic or partisan use of fiscal policy less likely in Swiss cantons. Rather surprisingly, however, we find at least some evidence for an electoral cycle in government spending. For government revenue or the overall budget, our empirical results do not point to an electoral cycle.
    Keywords: D72 ; E62 ; H62 ; ddc:330 ; Political budget cycle ; fiscal policy ; direct democracy
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 6
    Publication Date: 2019-03-16
    Description: Green fiscal reforms would contribute to climate change mitigation, increase the economic efficiency of national tax systems and provide additional public revenues. Some countries in Latin America have already taken first steps towards green fiscal reforms. This outlook article provides an overview of the major challenges for the successful implementation of such reforms and discusses how they could be overcome.
    Keywords: H23 ; E62 ; Q54 ; N16 ; Q48 ; ddc:330 ; green fiscal reform ; energy subsidies ; Latin America ; multi-objective climate policy ; sequencing ; distribution
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 7
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    Wiesbaden: Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung
    Publication Date: 2019-04-16
    Description: There is substantial disagreement about the consequences of the Tax Cuts and Jobs Act (TCJA) of 2017, which constitutes the most extensive tax reform in the United States in more than 30 years. Using a large-scale two-country dynamic general equilibrium model with nominal rigidities, we find that the TCJA increases GDP by about 2% in the medium-run and by about 2.5% in the long-run. The short-run impact depends crucially on the degree and costs of variable capital utilization, with GDP effects ranging from 1 to 3%. At the same time, the TCJA does not pay for itself. In our analysis, the reform decreases tax revenues and raises the debt-to-GDP ratio by about 15 percentage points in the medium-run until 2025. We show that combining the TCJA with spending cuts can dampen the increase in government indebtedness without reducing its expansionary effect.
    Keywords: E62 ; E63 ; E65 ; ddc:330 ; tax reform ; corporate taxes ; capital taxes ; labor income taxes ; spending cuts ; fiscal stimulus
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 8
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    Kiel: Kiel Institute for the World Economy (IfW)
    Publication Date: 2019-04-16
    Description: The Portfolio Theory of Inflation (PIT) proposed in this study investigates the role of global financial markets in determining the effectiveness of macroeconomic policy in open and fully financial integrated economies. The PIT adopts a modified version of the portfolio balance approach to exchange rate determination and incorporates intertemporal optimal choices from global investors. These investors allocate resources across national economies based on local investment opportunities and policy credibility: when a country's credibility is low, they hold its economy to a tighter intertemporal budget constraint and the issuance of what they deem as "excess" public sector liabilities causes the country's currency to depreciate and inflation to rise due to a large exchange rate pass-through, with limited or no impact on output. On the other hand, high credibility creates space for effective and noninflationary macro policies but, if such space is abused, credibility gets dissipated and higher inflation reflects such dissipation.
    Keywords: E31 ; E4 ; E5 ; E62 ; F31 ; G15 ; H3 ; ddc:330 ; credibility ; exchange rate ; financial integration ; global investor ; interest rate ; intertemporal budget constraint ; money, bonds and assets ; pass-through
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 9
    Publication Date: 2019-05-17
    Description: Eine moderne öffentliche Infrastruktur ist die Grundlage einer leistungsfähigen Volkswirtschaft. Immer wieder ist in diesem Kontext von einer öffentlichen Investitionsschwäche die Rede. Mitunter wird angesichts negativer Nettoinvestitionen oder eines stagnierenden öffentlichen Nettoanlagevermögens sogar attestiert, Deutschland verzehre seinen staatlichen Kapitalstock. Zur Beurteilung der gesamtwirtschaftlichen Produktionswirkung sind jedoch das Nettoanlagevermögen und die Nettoinvestitionen keine geeigneten Indikatoren. Auf Basis des Bruttoanlagevermögens kann das pauschale Urteil, Deutschland verzehre seinen staatlichen Kapitalstock, verworfen werden.
    Keywords: E22 ; E62 ; H54 ; ddc:330
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: German
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  • 10
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    Bonn: Institute of Labor Economics (IZA)
    Publication Date: 2019-05-21
    Description: This chapter defines a universal public pension scheme (UPPS) as a government-mandated lifecycle longevity insurance scheme that transfers individual consumption from the working years to the retirement phase of the lifecycle. It discusses the differences in four UPPS designs defined with regard to whether they are defined contribution (DC) or defined benefit (DB), and financial (F) or nonfinancial (N). Generally speaking, DC schemes are distinguished from DB schemes by their basic building block of individual accounts. This ensures the important design feature of transparency, the "enabler" of economic efficiency - through the effects on marginal decisions to choose formal work over informal work or leisure and to postpone retirement marginally toward the end of the working life. The chapter examines additional criteria (fairness, financial sustainability, affordability, and adequacy), plus some other design characteristics of interest in a comparative assessment. The conclusion is that the two UPPS-DC designs are superior to the two UPPS-DB designs. The difference in the relative rates of return of NDC versus FDC designs, together with uncertain demographic effects on future investment needs, speak in favor of a UPPS portfolio with both. UPPS-FDC involves additional risks and costs, but also provides positive effects through returns for individuals and the economy.
    Keywords: D6 ; D62 ; D81 ; E62 ; G22 ; G28 ; H23 ; H55 ; J14 ; J18 ; ddc:330 ; non-financial defined contribution (NDC) ; income allocation ; retirement ; externalities ; transparency ; fairness ; universal public pension scheme (UPPS)
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 11
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    Frankfurt a. M.: Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS)
    Publication Date: 2019-06-06
    Description: There is substantial disagreement about the consequences of the Tax Cuts and Jobs Act (TCJA) of 2017, which constitutes the most extensive tax reform in the United States in more than 30 years. Using a large-scale two-country dynamic general equilibrium model with nominal rigidities, the authors find that the TCJA increases GDP by about 2% in the medium-run and by about 2.5% in the long-run. The short-run impact depends crucially on the degree and costs of variable capital utilization, with GDP effects ranging from 1 to 3%. At the same time, the TCJA does not pay for itself. In the analysis, the reform decreases tax revenues and raises the debt-to-GDP ratio by about 15 percentage points in the medium-run until 2025. The show that combining the TCJA with spending cuts can dampen the increase in government indebtedness without reducing its expansionary effect.
    Keywords: E62 ; E63 ; E65 ; ddc:330 ; tax reform ; corporate taxes ; capital taxes ; labor income taxes ; spending cuts ; fiscal stimulus
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 12
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    Kiel: Kiel Institute for the World Economy (IfW)
    Publication Date: 2019-06-08
    Description: The analysis of open macroeconomies typically assumes (implicitly or explicitly) that resource allocation decisions are taken by domestic agents. The Portfolio Theory of Inflation (PTI) developed in this study assumes that some critical allocation decisions are taken by global investors and investigates how such decisions affect the effectiveness of macroeconomic policy in open and highly financially integrated economies. The PTI adopts a modified version of the portfolio balance approach to exchange rate determination and incorporates optimal intertemporal choices from global investors who allocate resources internationally based, inter alia, on the perceived policy credibility of the national authorities and their policies. The PTI shows that when a country has low credibility and is heavily indebted, investors hold its economy to a tighter intertemporal budget constraint and policies aimed to stimulate output growth do in fact dissipate into currency depreciation and higher inflation, with limited or no impact on output. On the other hand, high credibility creates space for effective and non-inflationary macro policies with limited impact on nominal variables.
    Keywords: E31 ; E4 ; E5 ; E62 ; F31 ; G15 ; H3 ; ddc:330 ; credibility ; exchange rate ; financial integration ; global investor ; interest rate ; intertemporal budget constraint ; money, bonds and assets ; pass-through
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 13
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    Halle (Saale): Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
    Publication Date: 2019-06-14
    Description: In this paper, we use local projections to investigate the impact of consolidation shocks on GDP growth, conditional on the fragility of government finances. Based on a database of fiscal plans in OECD countries, we show that spending shocks are less detrimental than tax-based consolidation. In times of fiscal fragility, our results indicate strongly that governments should consolidate through surprise policy changes rather than announcements of consolidation at a later horizon.
    Keywords: E62 ; H63 ; ddc:330 ; fiscal multipliers ; fiscal consolidation ; local projections
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 14
    Publication Date: 2019-06-19
    Keywords: E61 ; E62 ; H62 ; H77 ; E32 ; E63 ; F45 ; E02 ; F21 ; G15 ; D22 ; J16 ; J78 ; M14 ; M51 ; J14 ; J26 ; I21 ; I28 ; ddc:330 ; fiscal rules ; public debt ; countercyclical policy ; monetary union ; stabilization funds ; fiscal policy ; capital market integration ; legal harmonization ; institutional differences ; board diversity ; gender equality ; gender quota ; Gender Pension Gap ; Europe ; SHARE ; education ; program evaluation
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: German
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  • 15
    Publication Date: 2019-06-15
    Keywords: E61 ; E62 ; H62 ; H77 ; E32 ; E63 ; F45 ; E02 ; F21 ; G15 ; D22 ; J16 ; J78 ; M14 ; M51 ; J14 ; J26 ; I21 ; I28 ; ddc:330 ; fiscal rules ; public debt ; countercyclical policy ; monetary union ; stabilization funds ; fiscal policy ; capital market integration ; legal harmonization ; institutional differences ; board diversity ; gender equality ; gender quota ; gender pension gap ; Europe ; SHARE ; education ; program evaluation
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 16
    Publication Date: 2019-06-22
    Description: The Tax Cuts and Jobs Act constitutes the largest change to the US tax system since the 1980s and thoroughly alters the way in which multinational companies are taxed. Current assessments on the reform’s international impact vary widely. This article sheds light on the tax reform’s expected effects on other countries. We first use representative German business survey data to analyse the impact of the reform on German firms. Many firms with substantial US revenues or production capacities in the US intend to expand US investment in response to the reform, in particular large firms and manufacturing companies. The effects on investment in Germany are ambiguous: While some firms substitute between investment locations, others expand in both countries. We subsequently extend our analysis to the global level using worldwide survey data. The results suggest a negative impact on tax revenues and investment in countries with close economic ties to the US.
    Keywords: H25 ; H32 ; H71 ; E62 ; F62 ; ddc:330 ; US tax reform ; corporate tax ; firm responses ; survey ; Germany
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 17
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    Munich: Center for Economic Studies and Ifo Institute (CESifo)
    Publication Date: 2019-06-22
    Description: We study the effects of federal purchases on firm investment using a novel panel dataset that combines federal procurement contracts in the United States with key financial firm-level information. Using panel fixed-effect models, propensity score matching, and inverse probability weighting estimation techniques, we find that 1 dollar of federal spending increases firms’ capital investment by 10 to 13 cents. In line with the financial accelerator model, our findings indicate that the effect of government purchases works through easing firms’ access to external borrowing. In particular, the effect is stronger for firms that face financing constraints and it is insignificant for unconstrained firms. Moreover, an industry-level analysis suggests that that the increase in investment at the firm level translates into an industry-wide effect without crowding-out capital investment of other firms in the same industry. Overall, our findings lend support to recent evidence on local multipliers in that increases in regional outputs should ultimately be reflected in firm balance sheets (demand for capital).
    Keywords: E62 ; H32 ; E69 ; ddc:330 ; investment ; federal procurement ; financing constraints ; spending ; multipliers
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 18
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    Munich: Center for Economic Studies and Ifo Institute (CESifo)
    Publication Date: 2019-06-22
    Description: We study aggregate, distributional, and welfare effects of a permanent reduction in the capital tax rate in a dynamic equilibrium model with capital-skill complementarity. Such a tax reform leads to expansionary long-run aggregate effects, but is coupled with an increase in the skill premium. Moreover, the expansionary long-run aggregate effects are smaller when distortionary labor or consumption tax rates have to increase to finance the capital tax rate cut. An extension to a model with heterogeneous households shows that consumption inequality increases in the long-run. We study transition dynamics and show that short-run effects depend critically on the monetary policy response: whether the central bank allows inflation to directly facilitate government debt stabilization and how inertially it raises interest rates. Finally, we contrast the long-term aggregate welfare gains with short-term losses, as well as in the model with heterogeneous households, show that welfare gains for the skilled go together with welfare losses for the unskilled.
    Keywords: E62 ; E63 ; E52 ; E58 ; E31 ; ddc:330 ; capital tax rate ; permanent change in the tax rate ; capital-skill complementarity ; skill premium ; inequality ; transition dynamics ; monetary policy response
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 19
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    Munich: Center for Economic Studies and Ifo Institute (CESifo)
    Publication Date: 2019-06-22
    Description: The goal of this paper is to study the effects of introducing income redistribution at the municipal level, with the adoption of local tax progressivity. In particular, we analyse whether this complex fiscal tool modifies the incentives of local politicians to be strategic leading to higher tax manipulation, in the form of political budget cycle. We exploit an Italian reform of the local personal income tax (PIT), which was flat before the intervention, that allows mayors to introduce progressive schemes. First, we make use of the staggered timing of local elections to estimate a Difference-in-Differences model and we find that the reform consistently amplifies political budget cycle of local PIT. In terms of mechanism, progressivity allows mayors to target diverse income groups and to play different strategies: high income rates, indeed, are subject to larger manipulation than the moderate ones. Second, we exploit the fact that income concentration level is a valid predictor for the introduction of progressivity. The main results are confirmed in a Triple-Differences analysis. And finally, we show that manipulation is rewarding from an electoral point of view. These results reveal a negative side of decentralizing income redistribution as it may lead to consistent tax manipulation and large distortions in fiscal policy.
    Keywords: D72 ; E62 ; H71 ; P16 ; ddc:330 ; tax progressivity ; personal income tax ; political budget cycle ; tax manipulation ; fiscal federalism
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 20
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    Munich: Center for Economic Studies and Ifo Institute (CESifo)
    Publication Date: 2019-06-22
    Description: The paper contributes to the growing global VAR (GVAR) literature by showing how global and national shocks can be identified within a GVAR framework. The usefulness of the proposed approach is illustrated in an application to the analysis of the interactions between public debt and real output growth in a multicountry setting, and the results are compared to those obtained from standard single country VAR analysis. We find that on average (across countries) global shocks explain about one third of the long-horizon forecast error variance of output growth, and about one fifth of the long run variance of the rate of change of debt-to-GDP. Evidence on the degree of cross-sectional dependence in these variables and their innovations are exploited to identify the global shocks, and priors are used to identify the national shocks within a Bayesian framework. It is found that posterior median debt elasticity with respect to output is much larger when the rise in output is due to a fiscal policy shock, as compared to when the rise in output is due to a positive technology shock. The cross country average of the median debt elasticity is 1.58 when the rise in output is due to a fiscal expansion as compared to 0.75 when the rise in output follows from a favorable output shock.
    Keywords: C30 ; E62 ; H60 ; ddc:330 ; factor-augmented VARs ; global VARs ; identification of global and country-specific shocks ; Bayesian analysis ; public debt and output growth ; debt elasticity
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 21
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    Munich: Center for Economic Studies and Ifo Institute (CESifo)
    Publication Date: 2019-06-22
    Description: Scholars have been active in investigating causes and consequences of austerity policies. We examine how economists use the term “austerity” in scientific studies and measure austerity in empirical analyses. The sample includes around 3,500 journal articles published in the top 400 journals (RePEc ranking) over the period 1990-2018. The results show that the term austerity is often used in heterodox journals. Papers published in mainstream journals use the term “fiscal consolidation” instead. The term austerity is ambiguous: scholars use manifold definitions of austerity and the empirical measures identify different country-year observations as periods of austerity. We employ panel data for 34 OECD countries over the period 1960-2014 and examine how austerity is associated with economic growth. The results show that depending on how austerity is measured, inferences change. Strategic selection of austerity measures allows scholars to arrive at any desired results about the economic effects of austerity periods.
    Keywords: P16 ; O11 ; O23 ; E62 ; ddc:330 ; austerity ; fiscal consolidation ; economic growth ; rankings
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 22
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    Kiel: Kiel Institute for the World Economy (IfW)
    Publication Date: 2019-07-19
    Description: This paper analyzes the impact of the composition of taxes on economic growth using a panel of OECD countries. In contrast to Kneller et al. (Fiscal policy and growth: evidence from OECD countries, 1999), over 1980-2005 distortionary taxation did not reduce growth, while an increase in non-distortionary taxation had a negative association with growth. When the data are extended to the great recession and its recovery period (1980−2015), distortionary taxation significantly reduces growth as originally conjectured, but the negative effect of non-distortionary taxation survives. This paper argues that distortions from expenditure taxes in recent years can be accounted for by a combination of an exploding increased debt/GDP and globalization.
    Keywords: H20 ; E62 ; O40 ; ddc:330 ; distortionary taxation ; non-distortionary taxation ; growth
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 23
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    Kiel, Hamburg: ZBW – Leibniz Information Centre for Economics
    Publication Date: 2019-07-20
    Description: This paper uncovers a new economic growth phenomenon whereby an economy becomes increasingly unresponsive to economic growth policies. This new phenomenon is referred to as growth fatigue. In this short paper, I document the growth fatigue phenomenon for the economy of Japan. My observations on Japan suggest that growth fatigue typically occurs in matured economies and that its causes are largely unknown.
    Keywords: B20 ; E65 ; E62 ; E64 ; O40 ; ddc:330 ; growth ; fatigue ; Japan ; fiscal ; monetary ; unconventional
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 24
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    Mannheim: ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
    Publication Date: 2019-07-20
    Description: The "true" size of fiscal multipliers is widely debated by economists and policy makers as large (small) multipliers provide arguments to expand (cut) public spending. Within a meta-analytical framework, we ask whether the large observed variance in multiplier estimates can be explained by the national imprint and various author incentives. For this purpose, we use data on economists' personal characteristics including results from a selfconducted author survey. Our evidence is consistent with the hypotheses that the national background of researchers and the interests of donors financing the research matter for the degree and direction of multiplier estimates. These potential biases largely disappear for teams of international co-authors.
    Keywords: B4 ; D72 ; E62 ; H11 ; ddc:330 ; biased research ; fiscal multipliers ; funding bias ; publication bias
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 25
    Publication Date: 2019-07-23
    Description: The Tax Cut and Jobs Act of 2017 (TCJA) made significant changes to corporate and personal federal income taxation, including limiting the SALT (state and local property, income and sales taxes) deductibility to $10,000. States with high SALT tend to vote Democratic. This paper estimates the differential effect of the TCJA on red- and blue-state taxpayers and investigates the importance of the SALT limitation to this differential. We calculate the effect of permanent implementation of the TCJA on households using The Fiscal Analyzer: a life-cycle, consumption-smoothing program incorporating all major federal and state fiscal policies. We find that the average percentage increase in remaining lifetime spending under the TCJA is 1.6 percent in red states versus 1.3 percent in blue states. Among the richest 10 percent of households, this differential is larger. Rich households in red states enjoyed a 2.0 percent increase compared to a 1.2 percent increase among the rich in blue-state households. This gap is driven almost entirely by the limitation on the SALT deduction. Excluding the SALT limitation from the TCJA results in a spending gain of 2.6 percent for rich red-state households compared to 2.7 percent for rich blue-state households.
    Keywords: D15 ; D31 ; D72 ; E62 ; H20 ; H22 ; H71 ; ddc:330 ; fiscal policy ; elections ; Tax Cuts and Jobs Act ; resource distribution ; federal tax reform ; state and local taxes ; life cycle model
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 26
    Publication Date: 2019-07-24
    Description: This study explored the nature of fiscal and monetary policy coordination and its impact on long-run sustainability in Kenya. The study employed annual time series data from 1963 to 2014. Two objectives were investigated. (i) The determinants ofmonetary and fiscal policy rules under different policy regimes. (ii) The nature of fiscal and monetary policy regimes coordination in Kenya. Markov switching models were used to determine fiscal and monetary policy regimes endogenously. The fiscal policy regime was regarded as passive if the coefficient of debt in the MS model was significant and negative. This fiscal policy regime is regarded as unsustainable since the rise in debt is associated with a deterioration of the fiscal balance. On the other hand, the active monetary policy is synonymous with contractionary monetary policy since real in interest rate reacts positively to an increase in inflation. Robust analysis conducted using self-exciting threshold models confirms that monetary and fiscal policy reaction functions are nonlinear. The study findings show that passive or unsustainable fiscal regime was more dominant over the study period. There is evidence to support coordination between fiscal and monetary policy. There is a tendency for monetary policy to actively and prudently respond to unsustainable fiscal policy. Secondly, monetary policy sequentially responds to fiscal policy. The study recommended the adoption of systematic monetary response to a periodic deviation of fiscal policy from a long-run sustainability path.
    Keywords: E62 ; F30 ; H61 ; ddc:330 ; policy regimes ; fiscal and monetary policy management ; Markov-switching ; SETAR
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 27
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    Berlin: Deutsches Institut für Wirtschaftsforschung (DIW)
    Publication Date: 2019-08-15
    Description: Ten years after the 2008 financial crisis, in the euro area investment is still below the pre-crisis level. Public and private investment growth is so weak that capital per worker (capital intensity) has virtually remained constant. An increase in public investment activity could ultimately stimulate private investment. Estimates for the euro area show that an increase in public investment by one billion euro goes hand in hand with a medium-term increase in private investment of around 1.1 billion euro. In Germany, the effect is somewhat greater. Investment in construction and infrastructure are the most significant drivers. The public sector's widespread reluctance to invest could partially explain the weakness in private investment activity. The public sector should now begin investing more. And the rigid balanced budget amendment (Schuldenbremse) should be replaced by more flexible expenditure rules.
    Keywords: E22 ; E62 ; H54 ; ddc:330 ; investment ; crowding in ; public finance
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  • 28
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    Geneva: Graduate Institute of International and Development Studies
    Publication Date: 2019-08-16
    Description: During the European sovereign debt crisis of 2011-13, some nations faced with rising borrowing costs adopted commitments to treat bondholders as priority claimants. That is, if there was a shortage of funds, bondholders would be paid first. In this article, we analyze the prevalence and variety of these types of commitments and ask whether they impact borrowing costs. We examine a widely-touted reform at the height of the Euro sovereign debt crisis in 2011, in which Spain enshrined in its constitution a strong commitment to give absolute priority to public debt claimants. We find no evidence that this reform had any impact on Spanish sovereign bond yields. By contrast, our examination of the U.S. Commonwealth of Puerto Rico suggests that constitutional priority promises can have an impact, at least where the borrower government is subject to supervening law and legal institutions.
    Keywords: E62 ; H62 ; H63 ; P16 ; ddc:330 ; Sovereign Debt ; Debt Sustainability ; Sovereign Spreads
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 29
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    Munich: Center for Economic Studies and Ifo Institute (CESifo)
    Publication Date: 2019-08-22
    Description: We show that, in many countries, tax compliance is volatile and markedly responds to fiscal policy. To explore the consequence of this novel stylized fact, we build a model of sovereign debt with limited commitment and imperfect tax enforcement. Fiscal policy persistently affects the size of the informal economy, which impact future fiscal revenues and thus default risk. This mechanism captures one key empirical regularity of economies with imperfect tax enforcement: the low sensitivity of debt price to fiscal consolidations. The interaction of imperfect tax enforcement and limited commitment strongly constrains the dynamics of optimal fiscal policy. During default crises, high tax distortions force the government towards extreme fiscal policies, notably including costly austerity spells.
    Keywords: E02 ; E32 ; E62 ; F41 ; H20 ; ddc:330 ; sovereign default ; imperfect tax enforcement ; informal economy ; fiscal policy
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  • 30
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    Munich: Center for Economic Studies and Ifo Institute (CESifo)
    Publication Date: 2019-08-22
    Description: We study the efficacy of releases from the U.S. Strategic Petroleum Reserve (SPR) within the context of fully specified models of the global oil market that explicitly allow for storage demand as well as unanticipated changes in the SPR. Using novel identifying strategies and evaluation methods, we examine seven questions. First, how much have exogenous shocks to the SPR contributed to the variability in the real price of oil? Second, how much would a one-time exogenous reduction in the SPR lower the real price of oil? Third, are exogenous SPR releases partially or fully offset by increases in private sector oil inventories and how does this response affect the transmission of SPR policy shocks? Fourth, how effective were actual SPR policy interventions, consisting of sequences of exogenous changes in the SPR, at lowering the real price of oil? Fifth, are there differences in the effectiveness of SPR emergency drawdowns and SPR exchanges? Sixth, how much did the creation and expansion of the SPR contribute to higher real oil prices? Finally, how much would selling half of the oil in the SPR, as recently proposed by the White House, lower the global price of oil (and hence the U.S. price of motor gasoline) and how much fiscal revenue would it generate.
    Keywords: Q38 ; Q43 ; E62 ; ddc:330 ; SPR ; crude oil ; oil inventories ; storage ; expectations ; policy intervention ; fiscal policy
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  • 31
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    Munich: Center for Economic Studies and Ifo Institute (CESifo)
    Publication Date: 2019-08-22
    Description: The paper analyses the linkages from financial developments to public finances. It maps and discusses the transmission channels to fiscal variables. These channels include asset prices, financing conditions, balance sheets of banks, non-banks and central banks and international linkages. The study argues that the fiscal effects via each and all these channels can be very serious in magnitude and can put the sustainability of public finances at risk. However, there is only limited in–depth analysis of these channels and risks.
    Keywords: E62 ; G01 ; H63 ; ddc:330 ; public debt ; deficits ; financial stability ; fiscal financial linkages ; sustainability ; asset prices
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  • 32
    Publication Date: 2019-08-20
    Description: Die Investitionen im Euroraum sind auch zehn Jahre nach der Finanzkrise noch immer nicht auf dem Vorkrisenniveau. Öffentliche und private Investitionen entwickeln sich so schwach, dass der Kapitaleinsatz pro Erwerbstätigem nahezu konstant bleibt. Ein Anstieg der öffentlichen Investitionstätigkeit könnte auch die private anregen. Schätzergebnisse für den Euroraum zeigen, dass ein Anstieg öffentlicher Investitionen um eine Milliarde Euro mit einem mittelfristigen Anstieg der privaten Investitionen von etwa 1,1 Milliarden Euro einhergeht. In Deutschland ist der Effekt sogar etwas größer: Eine investierte öffentliche Milliarde Euro erhöht die privaten Investitionen im Zeitraum von fünf Jahren um knapp zwei Milliarden Euro. Der Effekt wird insbesondere durch Bauund Infrastrukturinvestitionen getrieben. Die weitreichende Investitionszurückhaltung der öffentlichen Hand könnte somit auch einen Teil der Schwäche der privaten Investitionstätigkeit erklären. Öffentliche Investitionen müssen jetzt verstärkt getätigt werden. Dazu sollte die starre Schuldenbremse von flexibleren Ausgabenregeln abgelöst werden.
    Keywords: E22 ; E62 ; H54 ; ddc:330 ; Investment ; Crowding-In ; Public Finance
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: German
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  • 33
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    Seville: European Commission, Joint Research Centre (JRC)
    Publication Date: 2019-08-28
    Description: This paper examines the macroeconomic effects of tax changes in the EU between 2000 and 2016. The novelty of our approach hinges on the use of real-time estimates of discretionary fiscal adjustments, covering personal income taxes, social insurance contributions, corporate income taxes and value added taxes. In particular, exploiting a unique database covering anticipated and unanticipated tax reforms in the EU, we provide the first narrative estimates of output and employment multipliers for tax reforms in the EU. Our results suggest that medium-term revenue-based output multipliers are in the range of -1.8 for unanticipated and -2.3 for anticipated reforms. Preannounced reforms, moreover, portray larger labour supply responses (by 0.7 percentage points) and temporarily impact economic activity inversely upon announcement. Finally, we find evidence of asymmetry between the effects of revenue increasing and decreasing measures in the EU. On average, revenue-based consolidations resulted in a 1.2 percentage point larger medium-term output multiplier in absolute terms.
    Keywords: E62 ; H30 ; C32 ; C33 ; ddc:330 ; fiscal multipliers ; narrative approach ; discretionary tax reform
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  • 34
    Publication Date: 2019-09-04
    Description: Using novel data on military spending for 129 countries in the period 1988-2013, this paper provides new evidence on the effects of government spending on output in advanced and developing countries. Identifying government-spending shocks with an exogenous variation in military spending, we estimate one-year fiscal multipliers in the range 0.75-0.85. The cumulative multipliers remain significantly different from zero within three years after the shock. We find substantial heterogeneity in the multipliers across groups of countries. We then explore three potential sources leading to heterogeneous effects of fiscal policy: the state of the economy, openness to trade, and the exchange-rate regime. We find that the multipliers are especially large in recessions, in closed economies, and under a fixed exchange rate. We also discuss other potential reasons for heterogeneous effects of fiscal policy, such as its implementation and coordination with the monetary authority.
    Keywords: E32 ; E62 ; F44 ; H56 ; O23 ; ddc:330 ; fiscal policy ; military spending ; multiplier
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  • 35
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    Milano: Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE)
    Publication Date: 2019-09-04
    Description: This paper analyzes the redistributive channel of a money financed fiscal stimulus (MFFS). It shows that the way in which this regime is implemented is crucial to determine its redistributive effects and consequently its effectiveness. In normal times, the most effective regime is a MFFS with no additional intervention by the Central Bank to stabilize the real public debt using inflation, whereas a MFFS accompanied by real debt stabilization - through the adjustment of seigniorage - is the most effective one in a ZLB scenario. In a TANK model this regime is so effective to avoid the recessionary effects implied by the ZLB. This result does not hold in a RANK model, where the redistributive channel is absent. Remarkably, contrary to the common wisdom a MFFS is followed by a moderate increase of inflation, which is only temporarily higher than the target.
    Keywords: E32 ; E52 ; E62 ; ddc:330 ; Money-Financed fiscal stimulus ; seignorage ; government spending ; redistribution ; borrower-saver ; fiscal multipliers ; welfare ; RANK versus TANK
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  • 36
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    Istanbul: Koç University-TÜSİAD Economic Research Forum (ERF)
    Publication Date: 2019-09-05
    Description: The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Through the interest rate channel, fiscal stimulus from a weak fiscal position heightens investors' concerns about sovereign credit risk, raises economy-wide borrowing cost, and reduces private domestic demand. We document empirically the relevance of these two channels using an Interactive Panel Vector Auto Regression model. We find that fiscal multipliers tend to be smaller when fiscal positions are weak than strong.
    Keywords: E62 ; H50 ; H60 ; ddc:330 ; Fiscal multipliers ; fiscal position ; state-dependency ; Ricardian channel ; interest rate channel ; business cycle
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 37
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    Berlin: Freie Universität Berlin, Fachbereich Wirtschaftswissenschaft
    Publication Date: 2019-09-07
    Description: This paper revisits the personal expenditure tax (PET), the most prominent version of a progressive consumption tax. The PET has a long intellectual tradition in economics, and the merits and demerits of this alternative to the personal income tax have been discussed at length. What has been missing in the literature so far, however, is a systematic account of its effect on the business cycle. This paper therefore seeks to add to the theoretical literature on the PET and the wider literature on automatic fiscal stabilizers by analyzing the PET's macroeconomic properties in a modern business cycle model. To this effect, the paper introduces a highly stylized PET into a standard New Keynesian DSGE model, derives a log-linear version of the model, and draws a comparison with the existing income tax. The model simulations show that the two tax systems lead to quite different macroeconomic dynamics. Furthermore, it is found that the PET yields welfare gains, relative to the income tax, for all the demand shocks considered. The PET yields welfare losses, however, under a supply shock.
    Keywords: E2 ; E3 ; E32 ; E62 ; E52 ; ddc:330 ; Progressive Taxation ; Consumption Taxation ; Business Cycles ; DSGEModel ; Welfare Analysis
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  • 38
    Publication Date: 2019-09-17
    Description: The paper compares fiscal cyclicality across regions and countries from 1960 to 2016. It finds that more than half of 170 countries analyzed in seven regions had, in more recent years, limited fiscal space, and that their fiscal policy was either cyclical or procyclical. This was particularly apparent since the 2008−2009 global financial crisis, which was marked by increased procyclical government spending when accounting for net acquisition of nonfinancial assets and capital expenditure. We construct a limited-fiscal-capacity statistic, measured by public debt−average tax revenue ratio and its volatility, which is found to be positively associated with fiscal procyclicality. The cyclicality is asymmetric: on average, a more indebted government (relative to the tax base) spends more in good times and cuts back spending indifferently compared with low-debt countries in bad times. Having sovereign wealth funds is also associated with larger countercyclicality. An enduring interest rate rise entails diminished fiscal space−a 10% increase in the public debt−tax base ratio is associated with an upper bound of a 5.6% increase in government-spending procyclicality.
    Keywords: E02 ; E62 ; F40 ; ddc:330 ; cross-country analysis ; fiscal cyclicality ; public debt
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  • 39
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    Kiel, Hamburg: ZBW - Leibniz-Informationszentrum Wirtschaft
    Publication Date: 2019-09-21
    Keywords: H25 ; L52 ; E20 ; E62 ; L10 ; O30 ; ddc:330
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  • 40
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    Vienna: The Vienna Institute for International Economic Studies (wiiw)
    Publication Date: 2019-09-21
    Description: This paper provides econometric evidence on the impact of labour market regulations on ('structural') unemployment rates. Based on a data set for 23 OECD countries over the time period 1985‑2013, the panel regression results suggest that standard institutional labour market indicators – such as employment protection legislation, trade union density, tax wedge, minimum wages – largely underperform in explaining (medium-term) unemployment, while cyclical macroeconomic factors – in particular capital accumulation, but also the long-term real interest rate – are essential determinants. These results underscore that the existing macroeconometric evidence in favour of the view that labour market rigidities are at the heart of increased 'structural' unemployment in advanced economies is modest at best. Some labour market variables do have an impact on unemployment, but it is in general smaller than the impact of relevant macroeconomic variables. To understand the development of unemployment in OECD countries, researchers and policy-makers therefore should consider aggregate demand dynamics and focus on capital accumulation.
    Keywords: C54 ; E24 ; E62 ; ddc:330 ; unemployment ; labour market institutions ; NAIRU ; capital accumulation
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  • 41
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    Lincoln: University of Lincoln, Lincoln International Business School, Lincoln Economics and Finance Research Group (LEAF)
    Publication Date: 2019-10-09
    Description: This paper takes an otherwise standard real-business-cycle setup with government sector, and augments it with shocks to consumer confidence to study business cycle fluctuations. A surprise increase in consumer confidence generates higher utility, as the household values consumption more in that scenario. As a test case, the model is calibrated to Bulgaria after the introduction of the currency board (1999-2018). We find that shocks to consumer confidence by themselves cannot be the main driving force behind business cycle fluctuations, but when combined with technology shocks, model performance improves substantially. Therefore, allowing for additional factors, such as consumer confidence, to interact with technology shocks can be useful in explaining business cycle movements.
    Keywords: E32 ; E62 ; E21 ; ddc:330 ; consumer confidence shocks ; business cycles ; Bulgaria
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 42
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    Berlin: Deutsches Institut für Wirtschaftsforschung (DIW)
    Publication Date: 2019-10-18
    Description: We present evidence on the open economy consequences of US fiscal policy shocks identified through proxy-instrumental variables. Tax shocks and government spending shocks that raise the government budget deficit lead to persistent current account deficits. In particular, the negative response of the current account to exogenous tax reductions through a surge in the demand for imports is among the strongest and most precisely estimated effects. Moreover, we find that the reduction of the current account is amplified when the tax reduction is due to lower personal income taxes and when the government increases its consumption expenditures. Historically, a much larger share of current account dynamics has been due to tax shocks than to government spending shocks.
    Keywords: E32 ; E62 ; F41 ; ddc:330 ; tax policy ; government spending ; proxy-vector autoregressions ; current account,twin deficits
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  • 43
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    Kiel, Hamburg: ZBW - Leibniz-Informationszentrum Wirtschaft
    Publication Date: 2019-10-24
    Keywords: E62 ; E32 ; C32 ; ddc:330
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  • 44
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    Kiel, Hamburg: ZBW - Leibniz-Informationszentrum Wirtschaft
    Publication Date: 2019-10-24
    Keywords: E31 ; E52 ; E58 ; E62 ; C11 ; ddc:330
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  • 45
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    Kiel, Hamburg: ZBW - Leibniz-Informationszentrum Wirtschaft
    Publication Date: 2019-10-24
    Keywords: E62 ; ddc:330
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  • 46
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    Kiel, Hamburg: ZBW - Leibniz-Informationszentrum Wirtschaft
    Publication Date: 2019-10-24
    Keywords: D31 ; E31 ; E44 ; E52 ; E62 ; ddc:330
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
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  • 47
    Publication Date: 2019-11-07
    Description: The aim of this paper is to estimate government consumption multiplier and to examine the effect of various characteristics of countries on the size of fiscal multiplier. We apply a panel VAR model following Ilzetzki et al. (2013) for a sample of 28 EU countries covering the period from 1995 to 2017. Key findings are, first, the estimated average fiscal multiplier is larger than unity. Second, the size of fiscal multiplier is larger in the cases of lower public indebtedness, for more developed European countries and for more financially open economies, which is also in line with relevant empirical literature. Regarding the role of trade openness, the results are inconclusive. In addition to this, membership of countries in the European integrations positively affects the size of fiscal multiplier. Therefore, fiscal policymakers should use fiscal stimuli as the instrument of boosting short-term economic growth selectively and consider country-specific characteristics. This paper contributes to the ongoing discussion in two ways, it examines the effect of additional characteristics of countries on the size of fiscal multiplier and updates existing empirical literature.
    Keywords: C23 ; E60 ; E62 ; ddc:330 ; country characteristics ; fiscal multiplier ; panel VAR
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  • 48
    Publication Date: 2019-11-07
    Description: The purpose of the article is to present the possible regimes of bank resolution in the euro system and to highlight open questions concerning additional capital buffers and the valuation of assets according to the Bank Recovery and Resolution Directive (BRRD). The bail-in tool is used to write down or to convert certain liabilities with the purpose of restoring the capital adequacy. The valuation exercise would determine the amount of loss absorbtion to restore viability of the institution and capital adequacy. The bridge bank tool offers deeper restructuring powers to the competent resolution authority. Sale of the business tool is actually a variation of the bridge bank tool, enabling the resolution authority to transfer assets and liabilities to investors. The asset separation tool always is combined with another tool. The write-down is not a resolution tool, as it affects equity, while a bail-in tool goes further to other subordinated debt and senior debt. It is possible to establish additional resolution tools in the national legislation, as long as these tools are compatible with the principles of directive and national legislation in order to support cross-border group resolution. The issue of bank overregulation and the ability to meet the requirements without negative effects on the economy is emphasized.
    Keywords: E50 ; E59 ; E62 ; E6 ; ddc:330 ; recovery and resolution regimes ; bridge bank ; sale of business ; asset separation tool ; bail-in ; regulation
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  • 49
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    Essen: RWI - Leibniz-Institut für Wirtschaftsforschung
    Publication Date: 2019-11-08
    Description: We investigate whether the macroeconomic effects of government spending shocks vary with the level of uncertainty. Using postwar US data and a Self-Exciting Interacted VAR (SEIVAR) model, we find that fiscal spending has positive output effects in tranquil times but is contractionary during uncertain times. The endogenous reaction of macroeconomic uncertainty plays an important role in explaining the non-linear impact of government spending. In contrast to other types of government spending, research and development expenditures reduce uncertainty and have an expansionary effect on output during uncertain times.
    Description: Die Studie untersucht, ob die gesamtwirtschaftlichen Auswirkungen unerwarteter Staatsausgabenerhöhungen mit dem vorherrschenden Grad an Unsicherheit in einer Volkswirtschaft zusammenhängen. Anhand von US Nachkriegsdaten und einem SEIVAR finden wir positive Effekte auf die Wirtschaftsleistung in Zeiten niedriger Unsicherheit und negative Effekte in Zeiten sehr hoher Unsicherheit. Die endogene Reaktion der gesamtwirtschaftlichen Unsicherheit stellt einen wichtigen Faktor für die Erklärung der nichtlinearen Auswirkungen der Staatsausgaben dar. Die Ergebnisse zeigen zudem eine Abhängigkeit der Effekte von der Art der Staatsausgaben. Im Gegensatz zu anderen Arten von Staatsausgaben reduzieren Forschungs- und Entwicklungsausgaben den Grad gesamtwirtschaftlicher Unsicherheit und wirken in unsicheren Zeiten expansiv auf die Wirtschaftsleistung.
    Keywords: E62 ; E32 ; C32 ; ddc:330 ; Government spending shocks ; uncertainty ; non-linear structural vector autoregressions ; interacted VAR ; generalized impulse response functions ; endogenous uncertainty
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  • 50
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    Kiel, Hamburg: ZBW – Leibniz Information Centre for Economics
    Publication Date: 2019-11-22
    Description: In this paper, we explore the output-volatility reducing role of automatic stabilizers in the nine EMU member states comprising Austria, Finland, France, Germany, Ireland, Italy, Portugal, the Netherlands, and Spain for the period 1995-2017. Overall, the empirical results obtained by using the Pooled Mean Group estimator proposed by Pesaran et al. (1999) suggest that automatic stabilizers deliver a significant counter-effect on output volatility measured by the real GDP per capita volatility in the short run. More specifically, output-volatility responses to automatic stabilizers by a reduction between -1.2 and -9.7 percentage points depending on the proxy measure used for automatic stabilizers. However, the output-volatility reducing effect of automatic stabilizers is statistically insignificant in the long run. The results support the view that automatic stabilizers are an important fiscal mechanism for the short-run output stabilization, but their output-volatility offsetting role is largely subject to what the proxy measures are used for automatic stabilizers.
    Keywords: E31 ; E32 ; E62 ; ddc:330 ; Automatic stabilizers ; Fiscal policy ; PMG estimator ; EMU member states
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  • 51
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    Marburg: Philipps University Marburg, Department of Geography
    Publication Date: 2019-11-22
    Description: Regional fiscal equalization in Germany aims to reduce fiscal disparities by allocating financial resources to less promising regions in order to support the supply of public goods. This paper aims to analyse secondary economic effects of regional fiscal equalization on several economic in- and output variables. Additionally, the paper examines the potential regional characteristics to influence the transformation of fiscal inputs into economic outcomes. Lastly, I compare the effects of fiscal equalization to these of the major German structural funding program GRW. My findings reveal a significant positive effect of fiscal equalization on the regional employment rate. Moreover, the findings suggest different transmission channels of fiscal equalization in East and West Germany. Particularly, I find higher effects in right-wing CDU/CSU preferring regions on the employment, human capital and private-sector investment rate. Finally, while structural funding affects more economic variables significantly, the magnitude of the estimated economic responses of fiscal equalization compared to these of German structural funding are not statistically different.
    Keywords: C33 ; E62 ; R11 ; R58 ; O38 ; O47 ; ddc:330 ; fiscal equalization ; regional economic growth ; production function ; political ideology ; SpPVAR ; impulse-response functions
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  • 52
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    Düsseldorf: Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK)
    Publication Date: 2019-11-23
    Description: Preferences over wealth can explain why households do not spend more when real interest rates fall, because they save more than optimal under a standard model. However, little is known about preferences over wealth empirically. We run an intentionally simple lab experiment on intertemporal spending and saving decisions with 180 students. Under a positive discount factor, zero interest and linear utility, maximizing behaviour would imply spending any funds instantaneously. While half of the participants behave optimally, we find a robust pattern where participants on average form and maintain a stock of wealth, consistent with wealth entering the utility function directly.
    Description: In kürzlich erschienen Veröffentlichungen werden sogenannte Vermögenspräferenzen (preferences over wealth) als eine mögliche Erklärung dafür angeführt, warum Haushalte nicht mehr ausgeben, obwohl das Zinsniveau sehr niedrig ist. Mit Vermögenspräferenzen sparen Haushalte mehr als in einem Standardmodell "optimal" wäre. Allerdings gibt es bisher wenig empirische Evidenz über solche Vermögenspräferenzen. Wir führen ein möglichst einfach gehaltenes Labor-Experiment zu intertemporalen Ausgabe- und Sparentscheidungen mit 180 Studenten durch. Im Experiment wäre die optimale Entscheidung, sämtliche Guthaben sofort auszugeben, da wir einen positiven Diskontfaktor, einen Zinssatz von Null und keine Anreize zur Konsumglättung vorgeben. Während sich ca. die Hälfte der Probanden "optimal" im Sinne der Auszahlungsfunktion verhält, ergibt sich dennoch ein deutliches Muster, wonach die Probanden im Durchschnitt ein gewisses Sparguthaben aufbauen und beibehalten. Die Ergebnisse sind konsistent mit einem Modell, in dem Sparguthaben direkt Nutzen stiftet.
    Keywords: D12 ; E21 ; E62 ; H23 ; ddc:330 ; consumption ; saving motives ; wealth ; experiment
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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    München: ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München
    Publication Date: 2019-11-28
    Description: Die Parteiensysteme befinden sich in vielen Industrieländern im Wandel. Infolge zunehmender Konvergenz in den Politiken etablierter Parteien sind an den Rändern der Parteienspektren Räume für neue, teilweise radikale Parteien entstanden. Die Sitze in den Parlamenten verteilen sich auf mehrere Fraktionen als früher, und Einparteienregierungen und Koalitionen aus zwei der etablierten Parteien werden unwahrscheinlicher. Mit den Parteien an den Rändern wollen gegenwärtig kaum etablierte Parteien koalieren. Minderheitsregierungen könnten somit auch in Deutschland eine Alternative zu bisherigen Regierungskoalitionen sein. Befürchtungen, dass Minderheitsregierungen aufgrund von womöglich teurer Kompromisse Staatsausgaben und Haushaltsdefizite erhöhen, werden nach den Ergebnissen einer neuen Studie für 23 OECD-Länder im Zeitraum 1960–2015 nicht bestätigt.
    Keywords: E62 ; ddc:330 ; Fiskalpolitik ; Industrieländer
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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    Publication Date: 2019-12-06
    Description: Do voters punish governments that introduce fiscal "austerity" measures? If so, does voter response vary according to the design (composition) of fiscal adjustments? What determines the timing of fiscal consolidations? The empirical literature on the political economy of fiscal adjustments, mostly OECD-based, argues that consolidations do not have significant electoral consequences. This paper re-examines these questions and finds that voters punish fiscal consolidations at the polls in Latin America and the Caribbean (LAC). To explain this result, we focus on the composition and timing of fiscal adjustments episodes. Such episodes rely fundamentally on increasing tax rates and bases of indirect taxes (such as the VAT) that hit broad segments of the population. Moreover, these policies are often implemented when politicians have no choice but to consolidate, that is, under severe economic circumstances. These macro results are corroborated with micro evidence from an original survey experiment that measures voter's fiscal policy preferences over the business cycle in seven countries across Latin America. The experimental evidence shows that respondents prefer expenditure cuts to tax increases during recessions. This begs the question - if tax increases are more electorally costly, why do governments rely on them? It is argued the policy choice set available to pursue fiscal consolidation is relatively narrow in LAC, suggesting that investments in fiscal capacity are needed to expand the policy toolset of governments in the face of negative shocks.
    Keywords: E62 ; H20 ; H50 ; H62 ; ddc:330 ; Fiscal deficit ; Taxes ; Public expenditures ; Business cycle ; Elections
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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    Frankfurt a. M.: European Central Bank (ECB)
    Publication Date: 2019-12-06
    Description: We study optimal monetary and fiscal policy in a New Keynesian model where occasional declines in agents' confidence can give rise to persistent liquidity trap episodes. Unlike in the case of fundamental-driven liquidity traps, there is no straightforward recipe for mitigating the welfare costs and the systematic in ation shortfall associated with expectations-driven liquidity traps. Raising the in ation target or appointing an in ation-conservative central banker improves in ation outcomes away from the lower bound but exacerbates the shortfall at the lower bound. Using government spending as an additional policy tool worsens stabilization outcomes both at and away from the lower bound. However, appointing a policymaker who is sufficiently less concerned with government spending stabilization than society can eliminate expectations-driven liquidity traps altogether.
    Keywords: E52 ; E61 ; E62 ; ddc:330 ; Effective Lower Bound ; Sunspot Equilibria ; Monetary Policy ; Fiscal Policy ; Discretion ; Policy Delegation
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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    Washington, DC: Inter-American Development Bank (IDB)
    Publication Date: 2019-12-06
    Description: Many countries in the Caribbean have been grappling with persistent fiscal imbalances and rising debt levels. The average debt to GDP ratio in the Caribbean in 2017 was 76.6 percent, higher than the negative debt-growth threshold of 60 percent of GDP. Also, the average fiscal deficit as a percent of GDP was 2.8 percent, but with significant heterogeneity across countries ranging from 0.5 percent to 11 percent. Using the inter-temporal budget constraint framework and various panel data econometric estimators, this article examines the issue of fiscal sustainability for a group of 10 Caribbean countries over the period 1991-2017. The evidence from panel co-integration models of government revenue and expenditure shows that past fiscal behavior is 'weakly' sustainable. The 'weak sustainability' finding is reinforced by evidence from an extended fiscal reaction function which showed that the primary balance improves by about 0.02 for every 1 percentage point increase in the debt ratio.
    Keywords: C32 ; E62 ; H62 ; H63 ; ddc:330 ; Carribean ; fiscal sustainability ; intertemporal budget constraint ; panel cointegration
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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    Publication Date: 2019-12-06
    Description: This paper investigates the relationship between public and private wages in the five largest euro area countries for the period 1997-2017. The analysis shows that there exists a positive and significant response of private wages to a public wage shock. This effect is found to be temporary and to differ across countries (positive and significant in France, Spain, Italy and non-significant in Germany and the Netherlands). Interestingly, the response of private wages is found to be asymmetric: a positive and statistically significant response is found in case of a positive shock to public wages, while no statistically significant effects are detected in case of a cut to public wages. As the public wage containment policies adopted during the sovereign debt crisis are expected to be gradually lifted in several euro area countries, the findings of this paper suggest that knock-on effects on private sector wages cannot be excluded in the years to come.
    Keywords: E24 ; E62 ; J30 ; C33 ; C11 ; ddc:330 ; government wages ; private sector wages ; asymmetries ; spillovers
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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