Euro-Area Fiscal Stance: From Theory to Practical Implementation
CESifo, Munich, 2016
CESifo Working Paper No. 6040
Despite large automatic stabilizers, the performance of the Euro area as a whole in terms of fiscal stabilization is relatively poor. This report argues that a meaningful fiscal stance for the Euro area should rely on the current account as a complement to the output gap, and be coordinated only in “exceptional” times, the usual bottom-up approach of fiscal policy remaining appropriate for “normal” times. In such setting, the European Fiscal Board would play a key role in advising the Commission on the existence of “exceptional” circumstances, on the adequate aggregate fiscal stance and on its desirable distribution across member states.
Fiscal Policy, Macroeconomics and Growth
Public Finance