The paper extends the QUEST III model by home production to discuss fiscal limits in an economy with tax avoidance. It finds that revenue-maximising labour and corporate tax rates in the benchmark model are relatively high (54% and 72%) compared to current EU-average implicit tax rates. No such...

Against the background of recovering growth and remaining fiscal consolidation needs, reforming tax expenditures may offer a promising avenue to raise revenue and, at the same time, improve efficiency of the tax systems. The workshop, held by DG ECFIN on 23 October 2013, addressed the economic...

This paper introduces a simple rule for appraising the economic soundness of fiscal policies. It connects fiscal policy to a long-run debt objective, taken as an anchor, while arbitraging symmetrically between this debt objective and output stabilisation. The rule offers a benchmark to assess...

Ireland's successful conclusion of the financial assistance programme provides an important opportunity to assess the prospects of the Irish economy to achieve good growth, to prevent future banking crises and to lock in budgetary and fiscal improvements that were achieved over the course of the...

This paper develops a DSGE model for an open economy and estimates it on euro area data using Bayesian estimation techniques. The model features nominal and real frictions, as well as financial frictions in the form of liquidity constrained households. The model incorporates active monetary and...

This paper explores the effects of discretionary fiscal policy in a DSGE model that explicitly models housing investment and allows for credit constrained households along the lines of the financial accelerator literature.The presence of credit constrained households raises the marginal...

More than a third of the EU budget is devoted to Cohesion Policy with the objective to foster economic and social cohesion in the European Union. Large-scale fiscal transfers are used to support investment in infrastructure, R&D and human capital. This paper provides a model-based assessment of...

Ensuring high quality of public finances (QPF) with a view to supporting long-term economic growth has gained new urgency as the room for fiscal manoeuvre has shrunk in light of the current crisis. To more systematically analyse QPF and compare developments across countries and over time, a...

This paper analyses the cyclical behaviour of fiscal policy in euro-area countries over the 1980-2005 period, focusing on the distinct role of government revenue and expenditure. The estimation of separate fiscal policy reaction functions in good and bad times reveals that, controlling for other...

The Sapir report in 2004 famously dubbed the EU Budget a historical relic. In spite of calls from many quarters for a comprehensive budget reform, the Council negotiation was hampered by many institutional and political constraints and managed to deliver only limited change.However, the final...