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2018 | OriginalPaper | Buchkapitel

2. The Common Framework for National Fiscal Policies and the Euro Area Fiscal Union

verfasst von : Antonella Cavallo, Pietro Dallari, Antonio Ribba

Erschienen in: Fiscal Policies in High Debt Euro-Area Countries

Verlag: Springer International Publishing

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Abstract

The aims of this chapter are threefold. First, we provide an outline of the existing European regulatory framework for national fiscal policies. Second, we present and discuss some existing proposals of Fiscal Union for the Euro Area. Third, in the perspective of the evolution of Euro Area towards a full Monetary and Fiscal Union, we estimate and identify a structural VAR in order to study the effects of area-wide government spending shocks on aggregate output and other macroeconomic variables during the EMU period. We find that the government spending multiplier is above one, i.e. there are positive and sizeable effects exerted on output by increases in government expenditures. We also find that when fiscal stimuli are accommodated by monetary policy, spending multipliers have a notable increase. This overall picture is reinforced by analyzing the effects of government investment on macrovariables. Our main conclusion is that a centralized fiscal policy might successfully pursue the goal of macroeconomic stabilization in the Euro Area.

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Vorheriges Kapitel Introduction

Nächstes Kapitel The Macroeconomic Effects of Fiscal Policy Shocks: A Review of the Literature

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See European Commission (2017a).

The main EU Treaties and Regulations concerning fiscal policies are chronologically summarized in Fig. 2.1.

The former are independent public institutions at national level, established by the so-called Two-Pack, introduced in 2011, in charge of monitoring the compliance of the country with fiscal rules. The latter is an independent advisory board on fiscal matters, which provides the Commission with an evaluation of the implementation of the EU fiscal rules.

A heterogeneity of opinions exists both on the priority for the Euro Area to be embedded in a fiscal union and on how the fiscal union should be put in place, i.e. by creating a Euro-area budget for conducting a discretionary fiscal policy or, alternatively, by using automatic stabilizers (see inter alios De Grauwe and Ji 2016, Tabellini 2016, Ubide 2015, Sapir and Wolff 2015, Gros and Belke 2015 and Wyplosz 2005). Nonetheless, in the historical experience of currency unions and national states these two functions are indeed seen as complimentary.

Other legislations also contribute to define the current framework. We have summarized the main changes of fiscal rules over the years in Fig. 2.1. For additional details see European Commission (2017a).

These arms were initially introduced by the Stability and Growth Pact in 1997, which aimed to improve the budgetary discipline defined by the Maastricht Treaty but has been amended and then implemented by a set of subsequent rules. The more recent changes have been introduced by the TSCG and by the so-called Two-Pack.

See European Commission (2014).

The Commission defines a matrix that specifies the fiscal adjustment requirements under the preventive arm of the Pact. For additional details see European Commission (2017a).

Sanctions in the preventive arm have been introduced by the Six-Pack.

For more details see European Commission (2017a).

Information Updated to August 1st 2017.

Part of the EU Budget is addressed to security, justice, foreign policy and for administrative issues.

Data on European Budget come from the Section Budget on the European Commission web page.

For more details see Bordo et al. (2011).

Data sample depends on the country. For the Euro Area it starts from 1993:Q1 to 2008:Q4.

For a more extensive discussion on fiscal multipliers, see Chap. 3.

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Titel: The Common Framework for National Fiscal Policies and the Euro Area Fiscal Union
verfasst von: Antonella Cavallo
Pietro Dallari
Antonio Ribba
Verlag: Springer International Publishing
Buch: Fiscal Policies in High Debt Euro-Area Countries
Print ISBN: 978-3-319-70268-1

Electronic ISBN: 978-3-319-70269-8

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-319-70269-8_2