Carolin Nerlich
Economics
- Division
Fiscal Policies
- Current Position
-
Senior Lead Economist
- Fields of interest
-
Macroeconomics and Monetary Economics,Public Economics,Other Special Topics
- Professional experience
- 2024-
Senior Lead Economist, Fiscal Policies Division, Directorate General Economics, European Central Bank
- 2021-2023
Senior Lead Economist, Climate Change Centre, Counsel to the Executive Board, European Central Bank
- 2019-2021
Senior Lead Economist, Fiscal Policies Division, Directorate General Economics, European Central Bank
- 2017-2019
Lead Economist, Fiscal Policies Division, Directorate General Economics, European Central Bank
- 2011-2017
Principal Economist, Fiscal Policies Division, Directorate General Economics, European Central Bank
- 2004-2011
Senior Economist, EU Countries Division, Directorate General Economics, European Central Bank
- 1999-2004
Economist, Directorate General International and European Relations, European Central Bank
- 27 June 2024
- THE ECB BLOGDetails
- JEL Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
H50 : Public Economics→National Government Expenditures and Related Policies→General
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
- 18 June 2024
- FINANCIAL INTEGRATION AND STRUCTURE BOXFinancial Integration and Structure in the Euro Area 2024Details
- Abstract
- Substantial green and digital investments will be needed to reach the targets set for 2030 and beyond under the Green Deal and the Digital Compass. The EU faces a large gap in funding for these investment needs, raising the question of how private capital can be best mobilised to bridge the gap. This box presents an overview of estimates of green and digital investment needs and discusses some of the challenges to be met, in particular in terms of funding needs
- JEL Code
- Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
Q50 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→General
O30 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→General
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
H54 : Public Economics→National Government Expenditures and Related Policies→Infrastructures, Other Public Investment and Capital Stock
- 21 March 2024
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 2, 2024Details
- Abstract
- Climate change is increasingly affecting the euro area economy. That is why the ECB is committed to integrating climate change considerations into its activities. On 30 January 2024 the ECB published its climate and nature plan 2024-2025, which identifies three focus areas for its future work: (i) navigating the transition towards a green economy, (ii) addressing the increasing physical impact of climate change, and (iii) advancing work on nature-related risks. This box sets out the economic reasoning behind the ECB’s decision to advance its work in these three areas.
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 20 April 2023
- OCCASIONAL PAPER SERIES - No. 315Details
- Abstract
- Fiscal policy plays a prominent role in climate change mitigation and adaptation. An optimal combination of revenue policies, in particular taxes, and expenditure policies, such as subsidies and investment, is essential in order to achieve greenhouse gas emissions targets. This paper analyses the main fiscal instruments in place in European Union Member States, focusing on specific issues, such as the fiscal impact of extreme weather events, the interaction between debt sustainability and climate change, the green investment gap and the distributional impact of climate policies. The paper aims to provide an overview of existing fiscal policies and of the main fiscal challenges for a comprehensive European climate change strategy.
- JEL Code
- H2 : Public Economics→Taxation, Subsidies, and Revenue
H5 : Public Economics→National Government Expenditures and Related Policies
H6 : Public Economics→National Budget, Deficit, and Debt
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
D63 : Microeconomics→Welfare Economics→Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- 9 November 2022
- THE ECB BLOGRelated
- 7 November 2022
- THE ECB BLOG
- 2 November 2022
- THE ECB BLOG
- 15 November 2022
- THE ECB BLOG
- 18 November 2022
- THE ECB BLOG
- 28 September 2022
- RESEARCH BULLETIN - No. 99Details
- Abstract
- While there is broad consensus that carbon pricing is an effective instrument for combatting climate change, the potential contribution of central banks is still debated. Central banks around the world have adopted different strategies to consider climate change in their monetary policy frameworks. This article focuses on green quantitative easing (QE). Compared with a carbon tax, we find that green QE would contribute only moderately to reducing global temperatures, while partially crowding out green private investment. However, green QE could serve as a complementary instrument, especially if governments fail to coordinate on introducing a sufficiently ambitious carbon tax on the global scale.
- JEL Code
- E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 21 September 2022
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 6, 2022Details
- Abstract
- Mitigating climate change requires sustained and multipronged policy efforts, as a matter of urgency. Many initiatives to mitigate climate change are directly linked to fiscal policy, mainly through public spending or taxation. This article provides an overview of existing, required and expected fiscal climate policy efforts to advance the green transition in the euro area, focusing on carbon pricing and green public investment. It also looks at the distributional consequences of carbon pricing.
- JEL Code
- H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies
H30 : Public Economics→Fiscal Policies and Behavior of Economic Agents→General
Q52 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Pollution Control Adoption Costs, Distributional Effects, Employment Effects
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
- 8 August 2022
- WORKING PAPER SERIES - No. 2701Details
- Abstract
- We develop a two-sector incomplete markets integrated assessment model to analyze the effectiveness of green quantitative easing (QE) in complementing fiscal policies for climate change mitigation. We model green QE through an outstanding stock of private assets held by a monetary authority and its portfolio allocation between a clean and a dirty sector of production. Green QE leads to a partial crowding out of private capital in the green sector and to a modest reduction of the global temperature by 0.04 degrees of Celsius until 2100. A moderate global carbon tax of 50 USD per tonne of carbon is 4 times more effective.
- JEL Code
- E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 21 June 2022
- OCCASIONAL PAPER SERIES - No. 296Details
- Abstract
- The euro area, like many other advanced economies, has entered an era of drastic demographic change. Without appropriate policy responses, population ageing in the euro area is posing formidable challenges for potential growth, monetary policy and public finances. This paper examines – from a central bank’s perspective – the macroeconomic and fiscal effects of population ageing in the euro area and looks at the main challenges ahead in the next decades. Total population in the euro area is projected to decline as of around 2035, while the old-age dependency ratio will rise strongly in the coming 15 years, putting additional burden on pension systems. The analysis in the paper finds that the demographic changes in the euro area present a drag on potential growth, mainly through labour supply and productivity growth – similarly to developments in Japan, which is ahead of the euro area in terms of population ageing. Precautionary savings may be higher, and the natural rate of interest lower, while the effect on trend inflation and wages are not obvious. Population ageing is posing a burden on fiscal policy, through upward pressure on pension spending and adversely affecting the tax bases and the structure of public revenues. Thus, it poses significant challenges for fiscal sustainability, limits fiscal policy space and effectiveness. To safeguard against the adverse economic and fiscal consequences of population ageing, there is a need for fiscal buffers, improved quality of public finance and structural reforms.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 273Details
- Abstract
- The last review of the ECB’s monetary policy strategy in 2003 followed a period of predominantly upside risks to price stability. Experience following the 2008 financial crisis has focused renewed attention on the question of how monetary and fiscal policy should best interact, in particular in an environment of structurally low interest rates and persistent downside risks to price stability. This debate has been further intensified by the economic impact of the coronavirus (COVID-19) pandemic. In the euro area, the unique architecture of a monetary union consisting of sovereign Member States, with cross-country heterogeneities and weaknesses in its overall construction, poses important challenges. Against this background, this report revisits monetary-fiscal policy interactions in the euro area from a monetary policy perspective and with a focus on the ramifications for price stability and maintaining central bank independence and credibility. The report consists of three parts. The first chapter presents a conceptual framework for thinking about monetary-fiscal policy interactions, thereby setting the stage for a discussion of specifically euro area aspects and challenges in subsequent parts of the report. In particular, it reviews the main ingredients of the pre-global financial crisis consensus on monetary-fiscal policy interactions and addresses significant new insights and refinements which have gained prominence since 2003. In doing so, the chapter distinguishes between general conceptual aspects – i.e. those aspects that pertain to an environment characterised by a single central bank and a single fiscal authority and those aspects that pertain to an environment characterised by a single central bank and many fiscal authorities (a multi-country monetary union). ...
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 271Details
- Abstract
- This paper analyses the implications of climate change for the conduct of monetary policy in the euro area. It first investigates macroeconomic and financial risks stemming from climate change and from policies aimed at climate mitigation and adaptation, as well as the regulatory and fiscal effects of reducing carbon emissions. In this context, it assesses the need to adapt macroeconomic models and the Eurosystem/ECB staff economic projections underlying the monetary policy decisions. It further considers the implications of climate change for the conduct of monetary policy, in particular the implications for the transmission of monetary policy, the natural rate of interest and the correct identification of shocks. Model simulations using the ECB’s New Area-Wide Model (NAWM) illustrate how the interactions of climate change, financial and fiscal fragilities could significantly restrict the ability of monetary policy to respond to standard business cycle fluctuations. The paper concludes with an analysis of a set of potential monetary policy measures to address climate risks, insofar as they are in line with the ECB’s mandate.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 23 September 2020
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 6, 2020Details
- Abstract
- Fiscal policy is playing a key role in stemming the economic fallout from the coronavirus (COVID-19) pandemic. In addition to the discretionary fiscal policy measures employed by governments, automatic fiscal stabilisers play an important role in cushioning the economic downturn. This article shows that automatic fiscal stabilisers are generally sizeable in the euro area, but vary significantly across Member States. However, their effectiveness may be more limited at the current juncture, given the nature of the COVID-19 crisis and the high uncertainty surrounding its effects. This provides a rationale for a stronger role of discretionary fiscal policy at national and European level. Over the medium term, fiscal policies could increasingly make use of quasi-automatic fiscal instruments that provide additional timely, targeted and temporary macroeconomic stabilisation for the euro area. Careful consideration should be given to the design of such instruments over the business cycle, their economic efficiency, and to the need for building fiscal buffers in good times.
- JEL Code
- H12 : Public Economics→Structure and Scope of Government→Crisis Management
H20 : Public Economics→Taxation, Subsidies, and Revenue→General
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
- 29 July 2020
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 5, 2020Details
- Abstract
- With the ageing of the baby boom generation, the population share of the older working-age cohort, i.e. those between 55 and 74 years, has been gradually increasing. This age group has also seen a considerable rise in the labour force participation rate. This article examines the reasons behind the increase across euro area countries. Most euro area countries adopted substantial pension reforms in the last two decades to reduce risks to long-term fiscal sustainability. These pension reforms, complemented by other labour market reforms, can be expected to have boosted the labour force participation rate of older workers. While other factors, like better health conditions, rising life expectancy, higher educational levels, mainly among women, rising net wealth and labour market conditions have likely contributed, they alone cannot explain the particularly sharp rebound in the participation rate of older workers since 2000. The macroeconomic shock due to the on-going lock-down measures may, however, put further increases of the labour force participation rate at risk.
- JEL Code
- J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
J14 : Labor and Demographic Economics→Demographic Economics→Economics of the Elderly, Economics of the Handicapped, Non-Labor Market Discrimination
J21 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Force and Employment, Size, and Structure
J26 : Labor and Demographic Economics→Demand and Supply of Labor→Retirement, Retirement Policies
H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
- 20 April 2020
- WORKING PAPER SERIES - No. 2396Details
- Abstract
- Several European countries are currently considering reversing parts of their pension reforms that were adopted previously to improve sustainability. In this paper we present a framework that allows us to quantify the macroeconomic and fiscal costs of such reversals. We thereby integrate the country-specific information from the latest Ageing Report into a dynamic general equilibrium model with overlapping generations. Focusing on Germany and Slovakia as country cases, our model replicates the Ageing Report's pension expenditure projections very well. We calculate the macroeconomic impact of first the additional pension reforms needed to contain the public debt pressures arising from population ageing and second the costs of reform reversals. Our model results show that undoing past pension reforms would generate substantial adverse macroeconomic costs and could pose challenges for fiscal sustainability.
- JEL Code
- H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
J26 : Labor and Demographic Economics→Demand and Supply of Labor→Retirement, Retirement Policies
- 27 March 2020
- RESEARCH BULLETIN - No. 68Details
- Abstract
- In this article we examine the effects of reversing the pension reforms adopted since the early 2000s. We find that reversing past pension reforms would be very costly, and would put a disproportionate burden on current and future young generations. Even without reversals, further reforms are needed to address the adverse macroeconomic and fiscal impact of population ageing.
- JEL Code
- F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
- 13 June 2019
- OCCASIONAL PAPER SERIES - No. 224Details
- Abstract
- Well-functioning economic structures are key for resilient and prospering euro area economies. The global financial and sovereign debt crises exposed the limited resilience of the euro area’s economic structures. Economic growth was masking underlying weaknesses in several euro area countries. With the inception of the crises, significant efforts have been undertaken by Member States individually and collectively to strengthen resilience of economic structures and the smooth functioning of the euro area. National fiscal policies were consolidated to keep the increase in government debt contained and structural reform momentum increased notably in the second decade, particularly in those countries most hit by the crisis. The strengthened national economic structures were supported by a reformed EU crisis and economic governance framework. However, overall economic structures in euro area countries are still not fully commensurate with the requirements of a monetary union. Moreover, remaining challenges, such as population ageing, low productivity and the implications of digitalisation, will need to be addressed to increase economic resilience and long-term growth.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F10 : International Economics→Trade→General
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
O43 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Institutions and Growth
- 23 April 2019
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 3, 2019Details
- Abstract
- This article compares the fiscal rule framework in the euro area with the frameworks in the fiscally more integrated United States and Switzerland, with the aim of drawing lessons for ways in which fiscal rules could be reformed in European Economic and Monetary Union (EMU). Both the United States and Switzerland have a history of balanced budget rules that help stabilise government debt in individual states/cantons at moderate and broadly comparable levels. The recent shift towards balanced budget rules in the euro area is an important achievement in this direction, and has contributed to better average underlying budgetary positions. Still, the fiscal rule framework needs to be rendered more effective in reducing high levels of government debt and their dispersion across the euro area. Reducing the heterogeneity of government debt positions is also an important prerequisite for setting up a well-governed common macroeconomic stabilisation function at the centre of EMU in case of deep economic crises. This in turn would help to contain the procyclicality of fiscal rules at the country level.
- JEL Code
- H61 : Public Economics→National Budget, Deficit, and Debt→Budget, Budget Systems
H74 : Public Economics→State and Local Government, Intergovernmental Relations→State and Local Borrowing
H77 : Public Economics→State and Local Government, Intergovernmental Relations→Intergovernmental Relations, Federalism, Secession
- 27 June 2018
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 4, 2018Details
- Abstract
- This box presents the main projection results of the 2018 Ageing Report for euro area countries. The 2018 Ageing Report, published on 25 May 2018, is the latest of the reports prepared every three years by the Ageing Working Group of the Economic Policy Committee. The report provides long-term projections of total public age-related costs and their components, which comprise pensions, health care, long-term care, education expenditure and unemployment benefits, for all EU countries over the period 2016 70. These projections are, of course, dependent on the underlying assumptions.
- JEL Code
- H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
- 20 March 2018
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 2, 2018Details
- Abstract
- This article examines the macroeconomic and fiscal implications of population ageing in the euro area and looks at how pension reforms can help to address these challenges. According to Eurostat’s latest projections, population ageing is set to continue and even intensify in the euro area over the next few decades. This ongoing process, which stems from increases in life expectancy and low fertility rates, is widely expected to lead to a decline in the labour supply and productivity losses, as well as behavioural changes, and is likely to have an adverse effect on potential growth. Moreover, by causing increases in precautionary savings, ageing can be expected to have a dampening impact on interest rates over an extended period of time. Population ageing also entails changes in relative prices, mainly owing to shifts in demand, with demand for services rising. Furthermore, euro area countries are also projected to experience further upward pressure on public spending on pensions, health care and long-term care as their populations age. Although many euro area countries implemented pension reforms following the sovereign debt crisis, further reforms appear to be necessary in order to ensure fiscal sustainability in the long run. In this respect, measures that increase the retirement age can be expected to dampen the adverse macroeconomic effects of ageing, as they will have a favourable impact on the labour supply and domestic consumption. In contrast, increasing the contribution rate or reducing the benefit ratio could have less favourable macroeconomic implications.
- JEL Code
- H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
J14 : Labor and Demographic Economics→Demographic Economics→Economics of the Elderly, Economics of the Handicapped, Non-Labor Market Discrimination
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
- 15 December 2015
- WORKING PAPER SERIES - No. 1872Details
- Abstract
- In this paper we analyse the interaction of fiscal rules and fiscal space. We find strong evidence for fiscal rules being associated with higher fiscal space. Furthermore, the analysis shows that countries with more fiscal space tend to have higher discretionary expenditures, but that this effect is significantly reduced if fiscal rules are in place. A similar effect can be observed for the procyclicality of fiscal policy, which is significantly higher in an environment of ample fiscal space, while this difference is reduced with fiscal rules. Regarding the different types of fiscal rules, we find the strongest results for expenditure rules and to a lesser extent for balanced budget rules, but none for debt rules.
- JEL Code
- E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H60 : Public Economics→National Budget, Deficit, and Debt→General
- 11 September 2013
- WORKING PAPER SERIES - No. 1588Details
- Abstract
- This study analyses the link between fiscal frameworks and their budgetary impact. We look at different features of national numerical fiscal rules in combination with fiscal councils and medium-term budgeting frameworks. We construct our own time-varying dataset for national fiscal frameworks for the period 1990-2012 covering all 27 EU Member States and estimate a dynamic panel on aggregate and disaggregated fiscal policy variables. We find strong support that numerical fiscal rules help to improve the primary balance, and that the budgetary impact can be further strengthened when supported by independent fiscal councils and an effective medium-term budgeting framework.
- JEL Code
- E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H60 : Public Economics→National Budget, Deficit, and Debt→General
Annexes - 29 November 2007
- WORKING PAPER SERIES - No. 827Details
- Abstract
- The purpose of this paper is to evaluate the empirical relevance of real convergence on the process of nominal convergence for the new EU Member States. We discuss two of the main channels through which real convergence could affect relative prices with respect to the euro area: productivity growth and increased trade openness. Productivity growth can have a positive effect on price levels via the Balassa-Samuelson effect, whereas increased openness leads to reductions in mark-ups and costs and therefore can have a negative impact on prices. In order to assess their empirical relevance, we used a Structural VAR model to which we applied a model reduction algorithm. This method accounts for endogeneity and simultaneity and circumvents the problem of limited data availability. Our findings show that, in general, openness has had a negative impact and productivity growth a positive one on price level convergence with respect to the euro area.
- JEL Code
- O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 29 February 2004
- OCCASIONAL PAPER SERIES - No. 11Details
- Abstract
- Official and unilateral dollarisation/euroisation has become a common policy advice for emerging market economies. Against this background, the paper provides a comprehensive review of all the main cases of dollarisation/euroisation, analysing motives, features and policy implications of this exchange rate regime. The main results are that policies fostering integration with the anchor country, in particular fiscal transfers, tourism and offshore finance, have been crucial in supporting the exchange rate regime. To this end, most dollarised/euroised countries have exploited advantages that are largely prior to the choice of exchange rate regime, namely their small size, geographic proximity to the anchor country, and politically dependent status. Thus, recommending dollarisation/euroisation irrespective of countries’ ex ante degree of integration with the potential anchor country seems to bear considerable risks, as dollarisation/euroisation does not seem to be a straightforward substitute for integration.
- 29 February 2004
- OCCASIONAL PAPER SERIES - No. 10The acceding countries’ strategies towards ERM II and the adoption of the euro: an analytical reviewDetails
- Abstract
- This paper reviews the strategies announced by the ten countries joining the European Union in May 2004 with regard to their intentions for participation in ERM II and the adoption of the euro. The paper examines the economic rationale of the monetary integration strategies declared by most acceding countries with a view to identifying also their potential risks. It does so by making use of several different approaches, including a short review of nominal convergence and a more extensive discussion from an optimum currency area perspective. An important part of the analysis is devoted to the implications of real convergence – i.e. catching-up growth in income and adjustment of the real economic structures towards those prevailing in the euro area – on the patterns of economic dynamics in acceding countries. Other aspects covered are the risks for external competitiveness in the convergence process and the appropriate pace of fiscal consolidation.
- 2022
- VoxEUGreen QE and carbon pricing: looking at potential tools to fight climate change
- 2020
- VoxEUFiscal and macroeconomic costs of pension reform reversals: evidence from Germany and Slovakia
- 2020
- IMF Working PaperA framework for assessing the costs of pension reform reversals
- 2016
- FinanzArchivFiscal rules, fiscal space and procyclical fiscal policy
- 2012
- Economic LetterOn the severity of economic downturns: lessons from cross-country evidence
- 2009
- Real Convergence in Central, Eastern and South-East EuropeThe link between real and nominal convergence: the case of the new EU Member States
- 2008
- Journal of International Money and FinanceHow is real convergence driving nominal convergence in the new EU Member States