Observed budget balances are an imperfect indicator of the fiscal policy stance, because fluctuations in economic activity induce automatic changes in the balance, hence the use of cyclically-adjusted balances (CAB). However, this paper shows that CABs (as measured through one of the two methods...

Should rational agents take into consideration government policy announcements? A skilled agent (an econometrician) could set up a model to combine the following two pieces of information in order to anticipate the future course of fiscal policy in real-time: (i) the ex-ante path of policy as...

The sovereign debt crisis in the euro area has raised interest in early warning indicators, aimed at signalling the build-up of fiscal stress in advance and helping prevent crises by means of a timely counteraction of fiscal and macroeconomic policies. This paper presents possible improvements...

In this paper we reflect on the role that fiscal policy could play in the resolution of the crisis in Eurozone countries crippled by both public and private debt, and beset by growth and competitiveness problems. As an illustration, we revisit the Spanish case, a paradigmatic example of the...

This paper reviews the existing empirical evidence on the short term impact on prices of fiscal variables and assesses it against new results from harmonised simulations, conducted with six well established econometric models used by the ECB and five national central banks (NCBs) of the...

This paper aims to test the validity of the Ricardian proposition for the Spanish economy from three different approaches: a) by testing its theoretical implications on the stability of national saving and the relationship between fiscal and current account balances, b) by carrying a number of...