Jean-Pierre Vidal
- 24 September 2012
- WORKING PAPER SERIES - No. 1477Details
- Abstract
- While the established literature on central bank communication has traditionally dealt with communication of monetary policy messages to financial markets and the wider public, central bank communication on fiscal policy has so far received little attention. This paper empirically reviews the intensity of central banks’ fiscal communication by five central banks (the US Federal Reserve, the ECB, the Bank of Japan, the Bank of England and the Swedish Riksbank) over the period 1999-2011. To that end, it develops a fiscal indicator measuring the fiscal-related communication in minutes or introductory statements. Our findings indicate that the ECB communicates intensively on fiscal policies in both positive as well as normative terms. Other central banks more typically refer to fiscal policy when describing foreign developments relevant to domestic macroeconomic developments, when using fiscal policy as input to forecasts, or when referring to the use of government debt instruments in monetary policy operations. The empirical analysis also indicates that the financial crisis has overall increased the intensity of central bank communication on fiscal policy. It identifies the evolution of the government deficit ratio as a driver of the intensity of fiscal communication by central banks in the euro area, the US and Japan, and for Sweden since the start of the crisis. In England the fiscal share in central bank communication is related to developments in government debt as of the start of the crisis.
- JEL Code
- E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination
E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
- 14 May 2012
- WORKING PAPER SERIES - No. 1434Details
- Abstract
- How large should a monetary policy committee be? Which voting rule should a monetary policy committee adopt? This paper builds on Condorcet's jury threorem to analyse the relationships between committee size and voting rules in a model where policy discussions are subject to a time constraint. It suggests that in large committees majority voting is likely to enhance policy outcomes. Under unanimity (consensus) it is preferable to limit the size of the committee. Finally, supermajority voting rules are social contrivances that contribute to policy performance in a more uncertain environment, when initial policy proposals are less likely to be correct, or when payoffs are asymmetric.
- JEL Code
- D71 : Microeconomics→Analysis of Collective Decision-Making→Social Choice, Clubs, Committees, Associations
D78 : Microeconomics→Analysis of Collective Decision-Making→Positive Analysis of Policy Formulation and Implementation
D81 : Microeconomics→Information, Knowledge, and Uncertainty→Criteria for Decision-Making under Risk and Uncertainty
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 28 December 2007
- WORKING PAPER SERIES - No. 843Details
- Abstract
- While fiscal forecasting and monitoring has its roots in the accountability of governments for the use of public funds in democracies, the Stability and Growth Pact has significantly increased interest in budgetary forecasts in Europe, where they play a key role in the EU multilateral budgetary surveillance. In view of the increased prominence and sensitivity of budgetary forecasts, which may lead to them being influenced by strategic and political factors, this paper discusses the main issues and challenges in the field of fiscal forecasting from a practitioner's perspective and places them in the context of the related literature.
- JEL Code
- H6 : Public Economics→National Budget, Deficit, and Debt
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
- 28 March 2007
- OCCASIONAL PAPER SERIES - No. 56Details
- Abstract
- This paper presents a survey of methods for assessing fiscal soundness, i.e. the capability of governments to honour their obligations in the short run and in the long run. The need for a comprehensive monitoring of fiscal soundness derives from the risks to economic stability that arise from the actual or expected difficulty a government may have in honouring its obligations. For the long run, methods derived from the government's intertemporal budget constraint make it possible to assess the size of a necessary adjustment to achieve sustainability of the debt burden. Uncertainty regarding shocks to the fiscal situation or the behaviour of financial market participants calls for the monitoring of financial flows and government obligations in the short run. Vigilance needs to be all the higher, the greater the uncertainty regarding long-term sustainability.
- 16 January 2006
- WORKING PAPER SERIES - No. 576Details
- Abstract
- Unstable government debt dynamics can typically be corrected by various fiscal instruments, like appropriate adjustments in government spending, public transfers, or taxes. This paper investigates properties of state-contingent debt targeting rules which link stabilizing budgetary adjustments around a target level of long-run debt to the state of the economy. The paper establishes that the size of steady-state debt is a key determinant of whether it is possible to find a rule of this type which can be implemented under all available fiscal instruments. Specifically, considering linear feedback rules, the paper demonstrates that there may well exist a critical level of debt beyond which this is no longer possible. From an applied perspective, this finding is of particular relevance in the context of a monetary union with decentralized fiscal policies. Depending on the level of long-run debt, there might be a conflict between a common fiscal framework which tracks deficit developments as a function of the state of the economy and the unrestricted choice of fiscal policy instruments at the national level.
- JEL Code
- E63 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy
H62 : Public Economics→National Budget, Deficit, and Debt→Deficit, Surplus
- 25 October 2004
- WORKING PAPER SERIES - No. 395Details
- Abstract
- This paper investigates fiscal sustainability in an overlapping generations economy with endogenous growth coming from human capital formation through educational spending. We assess how budgetary imbalances affect economic dynamics and the outlook for economic growth, thereby providing a rationale for fiscal rules ensuring sustainability. Our results show that the appropriate response of fiscal policy to temporary shocks is not trivial in the absence of fiscal rules. Fiscal rules allow for a timely reaction, thereby avoiding possibly disruptive fiscal adjustment in the future: the more adjustment is delayed, the larger is its necessary scale. We perform a rough calibration of the model to simulate the effects of a demographic shock (change in the population growth rate) under different fiscal policy scenarios.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
O41 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→One, Two, and Multisector Growth Models
E17 : Macroeconomics and Monetary Economics→General Aggregative Models→Forecasting and Simulation: Models and Applications
- 27 August 2004
- WORKING PAPER SERIES - No. 386Details
- Abstract
- This paper surveys intergenerational altruism in neoclassical growth models. It first examines Barro's approach to intergenerational altruism, whereby successive generations are linked by recursive altruistic preferences. Individuals have an altruistic concern only for their children, who in turn also have altruistic feelings for their own children. The conditions under which the Ricardian equivalence (debt neutrality) theorem applies are specified. The effectiveness of fiscal policy is further analysed in the context of an economy populated by heterogeneous families differing with respect to their degree of intergenerational altruism. Other forms of altruism, referred to as ad hoc altruism, are also examined, along with their implications for fiscal policy.
- JEL Code
- E13 : Macroeconomics and Monetary Economics→General Aggregative Models→Neoclassical
D64 : Microeconomics→Welfare Economics→Altruism, Philanthropy
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
C60 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→General
- 1 September 2003
- WORKING PAPER SERIES - No. 259Details
- Abstract
- In the context of a stylised game theoretical framework of capital tax competition, we show that when repeated policy interactions are associated to a systematic punishment of the deviating policymaker, a co-ordinated outcome can be the solution to the non co-operative tax game. This result suggests that explicit forms of policy co-ordination, such as a centralised tax authority, could in fact be largely unnecessary.
- JEL Code
- E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination
H87 : Public Economics→Miscellaneous Issues→International Fiscal Issues, International Public Goods
- 1 January 2003
- WORKING PAPER SERIES - No. 211Details
- Abstract
- We reconsider the well-established paradigm of a rational individual's choice of a consumption schedule, building on the idea that human beings devote resources to withstand their desire for immediate consumption, i.e. to become more patient, thereby making less remote the pleasure derived from deferred consumption. We construct an infinite-horizon model of a small open economy, in which individuals can accumulate a stock of personal capital that reduces the discount on future consumption. Personal capital captures the effect of a conumer's past experience and choices on his future utilities. Our main results are: i) when individuals are heterogenous with respect to ability to become patient all individuals exhibit the same rate of time preference in the long run; ii) effort is rewarded in the long run to the extent that individuals who need to make more effort to become patient are wealthier and enjoy a higher level of utility bin the steady state. The latter result stems from the complementarity between personal capital and deferred consumption.
- JEL Code
- E13 : Macroeconomics and Monetary Economics→General Aggregative Models→Neoclassical
- 1 November 2001
- WORKING PAPER SERIES - No. 90Details
- Abstract
- This paper investigates the relationship between the size of an unfunded public pension system and economic growth in an overlapping generation economy, in which altruistic parents finance the education of their children and leave bequests. Unlike the existing literature, we model intergenerational altruism by assuming that children's income during adulthood is an argument of parental utility. Unfunded public pensions can promote growth when families face liquidity constraints preventing them from investing optimally in the education of their children. We consider two alternative ways of financing a public pension system, either by levying social contributions in a lump-sum manner or in proportion to labour income. We find that there is no case for unfunded public pensions in economies where bequests are operative. By contrast, there exists a growth-maximising size of the public pension system in economies where bequests are not operative and individuals are sufficiently patient
- JEL Code
- H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
I20 : Health, Education, and Welfare→Education and Research Institutions→General
D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving