Fiscal Politics in the Euro Area
IMF Working Papers, January 30, 2017
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Bibliographic details
- Authors: Vitor Gaspar, Tigran Poghosyan
- Published: January 30, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475572919.001
Key findings
- Provides evidence of fiscal procyclicality in the euro area.
- Documents excessive deficits across the sample.
- Identifies distorted budget composition.
- Finds poor compliance with fiscal rules.
- Looks for, but does not find, conclusive evidence of bias in procedures in relation to country size.
- Briefly reviews literature on political economy factors and policy biases.
- Offers reflections on the euro area architecture.
Data, scope, and methodology
- Real-time data for 19 countries participating in the euro area over 1999–2015.
- Analysis focuses on fiscal governance, fiscal policy, fiscal rules, and fiscal stance.
- Sample and topics include country differentiation, country size, debt ratio, deficit bias, discretionary fiscal policy, EDP country, Europe, financial crisis, government yields of EA country, output gap, potential GDP, procyclicality, reaction result, and policy bias.
Implications and analytical emphasis
- Emphasizes the coexistence of procyclical fiscal policy and weak rule compliance, suggesting governance and incentive problems.
- Highlights distorted budget composition as a component of fiscal weaknesses, beyond headline deficit figures.
- Notes the importance of political economy factors in explaining observed policy biases.
- Offers policy-relevant reflections on the architecture of the euro area to address these fiscal governance challenges.
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- Fiscal Politics in the Euro Area