The fiscal mix in the euro-area crisis: dimensions and a model-based assessment of effects
Giovanni Callegari (),
Francesco Drudi and
Economic Policy, 2017, vol. 32, issue 89, 127-169
Summary The current paper contributes to the debate about fiscal policy’s role in shaping euro-area macroeconomic developments by providing facts: it documents the evolution of the euro-area’s fiscal mix since 2007 both across countries and across a broad set of fiscal instruments. The paper, then, evaluates the effects of the fiscal mix against one particular counterfactual. Namely, the paper asks: how would the euro-area macroeconomy have evolved if the Member States had strictly adhered to the fiscal behaviour embedded in pre-crisis fiscal rules? Towards this end, the paper first puts the fiscal mix into the context of New Keynesian business cycle theory, arguably the dominant theory of business cycles to date. The paper, then, builds a two-country model of a currency union to provide a quantitative assessment of how the fiscal mix may have affected the ‘Core’ countries and the ‘Periphery’ of the euro-area. The results suggest that fiscal policy in the euro-area as a whole and in each of the two blocks separately stimulated economic activity more and that public debt rose more than would have been the case under strict adherence to pre-crisis fiscal behaviour.
JEL-codes: E32 E62 E52 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:ecpoli:v:32:y:2017:i:89:p:127-169.
Access Statistics for this article
Economic Policy is currently edited by Giuseppe Bertola, Philippe Martin and Paul Seabright
More articles in Economic Policy from CEPR Contact information at EDIRC., CES Contact information at EDIRC., MSH Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().