Revising the European Central Bank’s fiscal rules to support growth and employment

Abstract

The paper presents a reform proposal for the operations of the European Central Bank (ECB) whose purpose is to create a common set of risk-free assets for financial institutions operating in the euro area (EA), which is the necessary condition for having a single internal financial market. The proposal does not require the introduction of changes in the existing European Union treaties. The effects of this reform on the debt dynamic of EA member countries permit a revision of the existing fiscal rules. With the help of some simulations, it is shown that maintaining compliance with the European treaties, the reform of the ECB operations and revised fiscal rules would transform the current fiscal deflationary stance into a reflationary one. Some implications for aggregate demand and growth for the EA are briefly discussed.     

Wilhelm Röpke and Richard C. Koo On Secondary Deflations and Balance Sheet Recessions

The concept of a ‘secondary deflation’ was developed in the 1930s by the German economist Wilhelm Röpke, who saw it as something different from a normal depression. While a primary deflation is a necessary reaction to the inflation from a boom period, a secondary deflation is independent and economically purposeless. Röpke argued that secondary depressions occurred in the US, Germany, France and Switzerland during the 1930s, but was vague on what made them follow primary depressions. Recently, the Taiwanese–American economist Richard C. Koo has claimed to have discovered the ‘Holy Grail of macroeconomics’, that is, what made the Great Depression so deep and long. During the Great Depression, the bursting of the asset price bubble resulted in private sectors having more debt than assets; as they shifted from maximising profits to minimising debt, the consequent debt deflation shrank the economy. According to Koo, Western economies today are suffering from a similar ‘balance sheet recession’. Strengthened by the notion of a balance sheet recession, Röpke's long‐lost insights might advance our understanding of the business cycle in general and the present crisis in the US and the Eurozone in particular.     

How important is fiscal policy cooperation in a currency union?

By constructing a dynamic stochastic general equilibrium model, which assumes a currency union consisting of two countries with nontradables, we study the importance of fiscal policy cooperation. As shown in the previous studies, we find that the role of fiscal policy is important in maximizing social welfare. However, we have a contrary result for fiscal policy cooperation. While the previous studies highlight that fiscal policy cooperation has a nontrivial effect in maximizing social welfare, we show that fiscal policy cooperation has no benefits, regardless of the share of nontradables. Self-oriented fiscal policy can replicate social welfare under the cooperative setting.     

经济政策主要变量对控制中国失业率有效性的实证检验

随着中国经济的增长,失业率却一直居高不下,因此国家采取各种手段进行宏观调控。在回顾各种经济学派对失业理论研究的基础上,着眼于经济政策对控制失业率是否有效,在简要分析货币政策和财政政策对失业率影响的基础上,选取1991—2011年中国城镇登记失业率、货币发行量以及财政支出,通过对三者进行单位根检验和Johansen协整检验,得到三者存在唯一的协整关系,并建立误差修正模型,得出货币发行量对失业率影响较大并且较稳定的结论,并通过格兰杰因果检验,得出货币发行量和财政支出与失业率之间都不存在因果关系,最后在实证研究的基础上对当前中国如何控制失业率提出相应的对策。     

Does the Decoupling Reform Affect Agricultural Employment in Sweden? Evidence from an Exogenous Change

This study uses aggregated municipality data, for the years 2001–2009, to explore whether direct payments to farmers affect agricultural employment in Swedish municipalities. The decoupling reform in 2005 included a new grassland support payment accompanied by management obligations that had unexpectedly high redistributive consequences as it greatly increased common agricultural policy payments to municipalities with large areas of grassland. In some municipalities, total payments more than doubled. Thus, since the reform seems exogenous to the behaviour of farmers and the regional economy, the reform can be used to identify a subsidy effect. We find that a permanent increase in agricultural employment can be attributed to the new grassland support. Our results indicate that the grassland support generates an additional job at a cost of SEK 250,000, relative to the average agricultural wage of SEK 333,000. However, the subsidy effect is largely keeping jobs in agriculture, i.e. the grassland support may be slowing down the process of structural change in grassland regions.     

地方财政行为是否驱动了中国贸易 收支的动态调整*——基于异质性动态调整模型的分析

本文利用1997-2013年中国省际层面的面板数据，借助异质性动态调整模型从动态视角考察了地方财政行为对中国贸易收支调整速度的影响。研究结果显示：（1）平均而言，在地方财政行为的驱动下，中国实际贸易收支向最优水平动态调整的速度约为0045。总体表明，地方财政行为对中国贸易收支的驱动性影响较弱，引致实际贸易收支向最优水平调整的速度也较为缓慢。（2）财政支出分权的强化会制约贸易收支的调整速度，贸易收支调整呈现“相对惰性”。财政收入分权的提高和预算内财政支出的扩张能够加快实际贸易收支向最优贸易收支调整的速度，助力贸易收支实现平滑调整。预算外财政支出和财政收入的变化对调整速度则不会产生显著性影响。（3）贸易收支的调整速度呈现显著的区域异质性。本文的结论表明，现阶段中国要实现贸易收支的平衡调整路径，中央及地方政府必须把握好财政行为与贸易收支的动态联动关系。     

Identifying Discretionary Fiscal Policy Reactions with Real‐Time Data

We propose a method of identifying discretionary fiscal policy reactions using real‐time data. Automatic stabilizers should depend on true GDP, while discretionary fiscal policy is contingent on the information that policy makers have in real time. We can compute a real‐time measurement error by comparing the first release of GDP data with later revisions. Discretionary fiscal policy is influenced by this measurement error, whereas automatic fiscal policy is not. We use this identification approach to test the central identifying assumption of Blanchard and Perotti’s (2002) seminal structural vector autoregression (VAR). According to this assumption, fiscal policy makers do not react to GDP developments contemporaneously in a discretionary fashion. We find that government expenditure is adjusted upward if GDP growth in real time is lower than true GDP. This suggests that fiscal policy makers use short‐term funds to buy goods and services in response to their perception of GDP dynamics.     

Designing intergovernmental fiscal transfers for conservation: The case of REDD+ revenue distribution to local governments in Indonesia

A REDD+ scheme would involve the transfer of financial resources to forested developing countries taking part in it. This paper simulates different approaches to the design of intergovernmental fiscal transfers (IFTs), a possible means to channel a REDD+ international payment to local governments which, in several countries, have a certain degree of authority over forest management. Using Indonesia as a case study, the cost-reimbursement and the derivation approaches are tested. It is demonstrated that both approaches could be used. Using the cost-reimbursement approach, localities with more degraded forests would receive a higher compensation per unit of carbon emission reduction than districts with primary forests. Avoiding further conversion of logged-over areas is associated with higher opportunity costs when compared with preventing the conversion of primary forests. In contrast, the derivation approach sets a fixed percentage and rate to distribute REDD+ revenues and ignores the opportunity costs of REDD+ incurred by local governments. The distribution of REDD+ revenues to eligible local governments is based on an assumed market price of carbon credits from REDD+. This paper concludes by discussing the implications of the findings for designing the distribution of REDD+ revenues, both for Indonesia and more generically for other developing countries.     

Structural reforms and fiscal adjustments: policy options for the euro area

This paper analyses the effects of structural reform and fiscal consolidation policies in the Euro Area using a stylized new-Keynesian model. A number of issues are focused upon: (i) the modelling and effects of fiscal consolidation and structural reforms, and (ii) evaluation of alternative reform and consolidation scenarios, including their joint implementation.     

家电下乡财政补贴分配机制研究

家电下乡财政补贴是国家引导消费、扩大内需的一项惠民政策。财政补贴是在农民和供应者之间进行的分配,在短期内双方获得的财政补贴与供给曲线的斜率成反比,并且是通过家电的涨价得以实现;中长期内则是由财政补贴家电下乡扩大内需和创造供给两方面的作用的博弈,通过供求曲线的移动实现。通过对财政补贴去向及其影响因素的分析,揭示农民受益、扩大内需、下乡效果三者之间的关系。