scholarly journals Fiscal Consolidation, Public Debt and Output Dynamics in the Euro Area: lessons from a simple model with time-varying fiscal multipliers

2014 ◽  
Vol 124 (6) ◽  
pp. 953 ◽  
Author(s):  
Christophe Blot ◽  
Marion Cochard ◽  
Jérôme Creel ◽  
Bruno Ducoudré ◽  
Danielle Schweisguth ◽  
...  
Keyword(s):  
Simple Model ◽  
Euro Area ◽  
Public Debt ◽  
Time Varying ◽  
Fiscal Consolidation ◽  
Fiscal Multipliers

scholarly journals Is there an alternative strategy for reducing public debt by 2032?

2014 ◽  
Vol 61 (1) ◽  
pp. 39-57 ◽  
Author(s):  
Christophe Blot ◽  
Marion Cochard ◽  
Jérôme Creel ◽  
Bruno Ducoudré ◽  
Danielle Schweisguth ◽  
...  
Keyword(s):  
Simple Model ◽  
Euro Area ◽  
Public Debt ◽  
Alternative Strategy ◽  
Debt Ratio ◽  
Fiscal Consolidation ◽  
Fiscal Multipliers ◽  
Alternative Path ◽  
Fiscal Compact ◽  
Output Losses

EMU countries have engaged in fiscal consolidation since 2011. This strategy has proven to be costly in terms of GDP. This cost has been amplified by the fact that fiscal multipliers are high in time of crisis, as recently stressed by the literature. Within this context, we wonder whether there is an alternative strategy aiming at bringing back the debt ratio to 60% of GDP in 2032, meanwhile lowering output losses. To this end, we report simulations realized from a simple model describing the Eurozone and the timing for consolidation. Based on a pragmatic view of the fiscal compact, we find an alternative path for consolidation which achieves a 60% threshold for public debt over the next 20 years in most euro area countries.

Rising Public Debt and the Need for Fiscal Consolidation in Europe

2010 ◽  
Vol 211 ◽  
pp. F27-F37
Keyword(s):  
European Union ◽  
Euro Area ◽  
Public Debt ◽  
Economic Activity ◽  
Negative Impact ◽  
The European Union ◽  
Fiscal Consolidation ◽  
The Third ◽  
Positive Growth ◽  
The Eu

The deepest, longest and most broadly-based recession the European Union has ever experienced appears to have come to an end. The third quarter of 2009 saw GDP in the EU increase by 0.3 per cent and economic activity in the Euro Area rose by 0.4 per cent. The recovery is expected to be broadly based across countries. After deep contractions registered in 2009 in all members of the EU (with the exception of Poland), all but four EU economies are expected to have recorded some growth in the second half of 2009. Greece, Ireland, Spain and Latvia suffered more than other EU economies, due to their intrinsic vulnerabilities, which reinforced the negative impact of the global shock. These economies are expected to record only moderate positive growth in 2011.

scholarly journals FISCAL POLICIES IN PANDEMIC TIMES: EUROPEAN EXPERIENCES

2021 ◽  
Author(s):  
Gligor Bishev ◽  
◽  
Aleksandar Stojkov ◽  
Fatmir Besimi ◽  
◽  
...  
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Empirical Literature ◽  
Policy Response ◽  
Fiscal Policies ◽  
Fiscal Consolidation ◽  
Fiscal Stimulus ◽  
Debt Sustainability ◽  
Fiscal Multipliers ◽  
The Impact

The pandemic recession was fundamentally different from ordinary recessions, and thus required a different policy response. We review the empirical literature on fiscal consolidation and fiscal multipliers. Then, we assess the impact of fiscal policies on the pace of recovery and public debt sustainability. A premature or a strong fiscal consolidation might result in lower rates of economic growth and elevated public debt as a share of GDP. We critically analyze different adjustment paths across Europe and offer policy-relevant recommendations. The issue is particularly relevant for countries with a strong fiscal stimulus and moderate to high levels of public debt.

From Grexit to Growth: On Fiscal Multipliers and how to End Recession in Greece

2013 ◽  
Vol 224 ◽  
pp. R66-R76 ◽  
Author(s):  
Nicos Christodoulakis
Keyword(s):  
Adverse Effects ◽  
Euro Area ◽  
Public Debt ◽  
Critical Parameter ◽  
Adjustment Programme ◽  
Fiscal Multipliers ◽  
Social Tensions

Three years after the implementation of the Adjustment Programme for Greece, public debt remains at unsustainable levels. Despite recent improvements in meeting deficit targets and the fact that the risk of exit from the Euro Area has subsided, growth is still missing and unemployment has surpassed 25 per cent, causing major social tensions. The paper argues that a critical parameter of such failure was that the Programme grossly underestimated the adverse effects that fiscal correction might have on growth. Fiscal multipliers are found to be significant in the Euro Area so that fiscal cuts had strong and permanent Keynesian effects, rather than a transitive and minor downturn as initially assumed. In light of this, the paper argues that policies should now concentrate on enhancing growth and by relaxing fiscal targets allow the multipliers to raise activity as the only route to safeguard the exit from recession and ensure sustainability of debt.

The IMF, the UK Policy Debate, and Debt and Deficit Discourse

2018 ◽  
Author(s):  
Ben Clift
Keyword(s):  
Adverse Effects ◽  
Coalition Government ◽  
Policy Debate ◽  
Fiscal Consolidation ◽  
Policy Space ◽  
Fiscal Multipliers ◽  
Scientific Image ◽  
The Uk ◽  
Deep Recession ◽  
The Imf

This chapter charts changing character of the economic ideas informing fiscal policymaking in Britain, and Fund responses to them. Drawing on interviews with the Fund’s UK Missions and UK authorities, it shows how, despite the IMF’s prizing of its non-political, scientific image, its differing views of UK policy space and prioritization became the stuff of a contested politics. The central assumption of the coalition government’s construction of fiscal rectitude was that Britain faced a ‘crisis of debt’, yet the IMF did not share this view. Fund work on fiscal multipliers being higher during recessions, and the adverse effects of fiscal consolidation on growth, all had pointed relevance for UK policy. The coalition government saw little potential for activist fiscal policy in support of growth. In 2013 Blanchard accused the UK authorities of ‘playing with fire’ by pursuing excessively harsh austerity which threatened a prolonged and deep recession.

scholarly journals The effect of Eurosystem asset purchase programmes on euro area sovereign bond yields during the COVID-19 pandemic

2021 ◽  
Author(s):  
George Hondroyiannis ◽  
Dimitrios Papaoikonomou
Keyword(s):  
Euro Area ◽  
Credit Ratings ◽  
Evidence Based ◽  
Time Varying ◽  
Safe Haven ◽  
Sharp Decline ◽  
Bond Yields ◽  
Perceptions Of Risk ◽  
Sovereign Bond ◽  
Sovereign Bonds

We investigate the effect of Eurosystem Asset Purchase Programmes (APP) on the monthly yields of 10-year sovereign bonds for 11 euro area sovereigns during January-December 2020. The analysis is based on time-varying coefficient methods applied to monthly panel data covering the period 2004m09 to 2020m12. During 2020 APP contributed to an average decline in yields estimated in the range of 58-76 bps. In December 2020 the effect per EUR trillion ranged between 34 bps in Germany and 159 bps in Greece. Stronger effects generally display diminishing returns. Our findings suggest that a sharp decline in the size of the APP in the aftermath of the COVID-19 crisis could lead to very sharp increases in bond yields, particularly in peripheral countries. The analysis additionally reveals a differential response to global risks between core and peripheral countries, with the former enjoying safe-haven benefits. Markets’ perceptions of risk are found to be significantly affected by credit ratings, which is in line with recent evidence based on constant parameter methods.

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