Plödt, Martin; Reicher, Claire - Institut für Weltwirtschaft (IfW) - 2014
We formulate and estimate a simple fiscal policy reaction function for the euro area and individual euro area countries … surpluses to the output gap, a response to the debt-GDP ratio, and an exogenous fiscal policy shifter. In line with the cyclical …-cyclical response of primary surpluses to the output gap for the euro area. We also find a consistently strong positive response of …