Euro-Area Fiscal Stance: From Theory to Practical Implementation

27 Pages Posted: 30 Sep 2016

See all articles by Agnès Bénassy-Quéré

Agnès Bénassy-Quéré

Paris School of Economics (University Paris 1)

Date Written: August 16, 2016

Abstract

Despite large automatic stabilizers, the performance of the Euro area as a whole in terms of fiscal stabilization is relatively poor. This report argues that a meaningful fiscal stance for the Euro area should rely on the current account as a complement to the output gap, and be coordinated only in “exceptional” times, the usual bottom-up approach of fiscal policy remaining appropriate for “normal” times. In such setting, the European Fiscal Board would play a key role in advising the Commission on the existence of “exceptional” circumstances, on the adequate aggregate fiscal stance and on its desirable distribution across member states.

Keywords: fiscal stance, coordination of fiscal policies, euro area, European Fiscal Board

JEL Classification: E620, F420, F450

Suggested Citation

Benassy-Quere, Agnes, Euro-Area Fiscal Stance: From Theory to Practical Implementation (August 16, 2016). CESifo Working Paper Series No. 6040, Available at SSRN: https://ssrn.com/abstract=2845283

Agnes Benassy-Quere (Contact Author)

Paris School of Economics (University Paris 1) ( email )

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France
+33 1 44 07 82 19 (Phone)

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