The green transition of the EU economy will require substantial investment to 2030 and beyond. Estimates of green investment needs vary between institutions and are surrounded by high uncertainty, but they all point to a requirement for faster and more ambitious action. Green investment will...

During the recent inflation episode, the paradigm of separated objectives for monetary and fiscal policies has shown some limits. Fiscal policies have helped mitigate inflation. We advocate for the emergence of a new paradigm that gives equal consideration to fiscal and monetary policies and...

This paper documents the extension of MEDSEA, a small open economy DSGE model for Malta, with a detailed energy sector. The model contains relatively rich fiscal and energy blocks allowing the model to simulate the transitional costs related to the economy's decarbonisation, together with the...

The marked turnaround in Russia's foreign trade in 2023 exerted strong downward pressure on the Russian rouble, which lost around 30% of its value. Global oil prices were declining in the first half of the year, the EU import embargo on Russian oil depressed prices even further; and on top of...

The sovereign debt crisis triggered a process of reforms in European economic governance that pushed for technocratic handling of budget decisions following standardized procedures, target measures, and indicators for fiscal monitoring. This shift, aimed at producing more stability and less...

This study uses data from 1986 to 2021 and the auto-regressive distributed lag model to explore India's fiscal policy determinants of government health spending. The results find two structural breaks in time: (i) 2002 for state government health spending (SGHS) and (ii) 2014 for central...

We build a model to study the interaction between default risk, policy changes, and financial frictions within a monetary union. The model features a centralised central bank and decentralised fiscal authorities. Countries have different reputations for fiscal stability, modelled as different...

Drumetz and Pfister (2021) make several claims about the inadequacy and fallacies of Modern Money Theory (MMT) and conclude that MMT is nothing more than a political manifesto; there are no theoretical and empirical foundations behind it. This paper addresses this last point by focusing on the...

Following the Great Financial Crisis of 2008-9, there has been a shift in mainstream economic policy modeling toward "realism," with dynamic stochastic general equilibrium (DSGE) models partly diverging from the representative agent framework, and large-scale, New-Keynesian structural models...

During the Covid-19 crisis, most OECD countries used short-time work (subsidized reductions in working hours) to preserve employment. This paper documents that short-time work affects the behavior of firms (supply) and households (demand). First, using household survey data from Germany, we show...

Recent empirical research finds little or mixed evidence in favour of a negative relationship between central bank independence and inflation. In this paper, we construct a theory where the relationship between inflation and central bank independence depends on the extent of informational...

In this paper, we use a static fiscal incidence analysis model to evaluate the poverty and inequality impacts of using fiscal policy to finance expanded social spending in South Africa. We assess three methods to enhance the social protection system's equity objectives: increasing the size...

We examine the economic and electoral effects of liberalisation measures using newlyconstructed databases on structural economic reforms and the outcome of democratic elections since the 1970s. The data shows a remarkable slowdown in the pace of liberalisation in both advanced and emerging...

We assess empirically the role of the World Bank’s Country Policy so-called fiscal policy rating variables (fiscal rating, debt rating and revenue rating) on economic growth in the 46 Least Developed Countries (LDCs) in the world, during the period 1990-2022. We also investigate the role of...

We use a quantitative heterogeneous agent model with nominal rigidities and unemployment risk to analyze the effectiveness of several fiscal policies in stabilizing a demand-driven recession. The model delivers empirically realistic distributions of marginal propensities to consume (mpc) and...

The aim of the research is to illustrate how the degree of effectiveness of fiscal policy measures varies depending on the level of public debt within a group of Central and Eastern European (CEE) states. To this end, a T-SVAR (Threshold Structural Vector Autoregressive) model was implemented,...

This paper quantifies the dynamic macroeconomic effects of tax changes in Germany, allowing for anticipation effects of preannounced tax reforms. Identification is achieved using a narrative approach, which provides information about the timing of tax reforms. An anticipated cut in taxes has a...

This paper employs a dynamic multi-sector growth model with changing technology to study the relevance of the price and quantity dimensions involved in the technical substitution of carbon-intensive technology, that is, the low-carbon transition. For the framing of the transition, the stylized...

Using a data-driven approach to identify structural vector autoregressive models, we examine key factors influencing the US dollar exchange rate across eight advanced economies from 1980 to 2022. We find that shocks to inflation expectations, which are closely tied to unfunded government...

This paper investigates the impact of population ageing on the economic and fiscal performance of Finland, a small open economy, which has undergone a rapid and significant demographic shift since 2010. By employing the Synthetic Control Method (SCM) to create a counterfactual scenario without...

In this paper, we study the implications of climate change on fiscal sustainability and inequality. First, using rich panel data, we show that rising climate-related disaster risks increase government debt and harm fiscal sustainability. We also find that the adverse effect of disaster risks is...

The debate on the reform of the European Union's fiscal rules, the Stability and Growth Pact, has largely focused on their design. This nearly exclusive focus has distracted attention from the equally, if not more, important aspects of implementation. The reform, completed in April 2024, left...

European Union countries are required by the EU Treaty to keep their budget deficits within 3 percent of GDP, and their public debt within 60 percent of GDP. A new framework to enforce these rules is based on country-specific debt sustainability analyses (DSA) and uses a single indicator, a...

Announcing a large fiscal stimulus may signal the government’s pessimism about the severity of a recession to the private sector, impairing the stabilizing effects of the policy. Using a theoretical model, we show that these signaling effects occur when the stimulus exceeds expectations and...