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Krzysztof Bańkowski

1 July 2022
WORKING PAPER SERIES - No. 2676
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Abstract
Since most macroeconomic data are revised after the initial release both researchers andpolicy-makers have no choice rather than recognising and understanding the revisions. Thispaper analyses revisions to the fiscal data in the euro area, also by contrasting them with the’better-understood’ macro revisions. Concretely, the study verifies whether fiscal revisionsfulfil requirements to treat them as well-behaved. To this end, we construct a fiscal quarterlyreal-time dataset, which contains quarterly releases of Government Finance Statistics andwhich is supplemented by macro variables from Main National Accounts. Fiscal revisionsdo not satisfy desirable properties expected from well-behaved revisions. In particular, theytend to have a positive bias, they exhibit a big dispersion and they are largely predictable.Also, they are similar to macro revisions, in particular since 2014, which contradicts theoften heard view about fiscal data being subject to particularly large revisions.
JEL Code
C80 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→General
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
27 April 2022
OCCASIONAL PAPER SERIES - No. 291
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Abstract
This paper assesses the potential economic impact of Next Generation EU (NGEU), focusing on the euro area. Its findings suggest that the envisaged national investment and reform plans present a coherent package to support both recovery from the pandemic-induced crisis and longer-term modernisation of the euro area economy through their digital and green transitions. NGEU, however, can only unfold its full potential if all plans are implemented in a timely and effective way. We estimate the impact of the national plans on output, inflation and public debt using ECB staff economic models under the assumption of successful implementation. Specifically, NGEU is expected to take effect through three channels: structural reform, fiscal stimulus and risk premium. Overall, NGEU may increase gross domestic product (GDP) in the euro area by up to 1.5% by 2026, with the impact expected to be significantly larger in the main beneficiary countries. In Italy and Spain, two of the main beneficiaries, the public debt-to-GDP ratio may be more than 10 percentage points lower by 2031. At the same time, all euro area countries are expected to benefit from NGEU through positive spillovers, greater economic resilience and convergence across countries. Finally, the effect of NGEU on euro area inflation over the medium term is deemed to be contained to the extent that the inflationary effect of additional public expenditure is offset, at least to some degree, by the disinflationary effect of greater productive capacity resulting from the planned structural reform and investment measures.
JEL Code
C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
E02 : Macroeconomics and Monetary Economics→General→Institutions and the Macroeconomy
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
H87 : Public Economics→Miscellaneous Issues→International Fiscal Issues, International Public Goods
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
6 December 2021
WORKING PAPER SERIES - No. 2623
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Abstract
This paper attempts to gauge the effects of various fiscal and monetary policy rules on macroeconomic outcomes in the euro area. It consists of two major parts – a historical assessment and an assessment based on an extended scenario until 2030 – and it builds on the ECB-BASE –a semistructural model for the euro area. The historical analysis (until end-2019, `pre-pandemic´) demonstrates that a consistently countercyclical fiscal policy could have created a fiscal buffer in good economic times and it would have been able to eliminate a large portion of the second downturn in the euro area. In turn, the post-pandemic simulations until 2030 reveal that certain combinations of policy rules can be particularly powerful in reaching favourable macroeconomic outcomes (i.e. recovering pandemic output losses and bringing inflation close to the ECB target). These consist of expansionary-for-longer fiscal policy, which maintains support for longer than usually prescribed, and lower-for-longer monetary policy, which keeps the rates lower for longer than stipulated by a standard reaction function of a central bank. Moreover, we demonstrate that in the current macroeconomic situation, fiscal and monetary policies reinforce each other and mutually create space for each other. This provides a strong case for coordination of the two policies in this situation.
JEL Code
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
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
21 September 2021
OCCASIONAL PAPER SERIES - No. 273
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Abstract
The last review of the ECB’s monetary policy strategy in 2003 followed a period of predominantly upside risks to price stability. Experience following the 2008 financial crisis has focused renewed attention on the question of how monetary and fiscal policy should best interact, in particular in an environment of structurally low interest rates and persistent downside risks to price stability. This debate has been further intensified by the economic impact of the coronavirus (COVID-19) pandemic. In the euro area, the unique architecture of a monetary union consisting of sovereign Member States, with cross-country heterogeneities and weaknesses in its overall construction, poses important challenges. Against this background, this report revisits monetary-fiscal policy interactions in the euro area from a monetary policy perspective and with a focus on the ramifications for price stability and maintaining central bank independence and credibility. The report consists of three parts. The first chapter presents a conceptual framework for thinking about monetary-fiscal policy interactions, thereby setting the stage for a discussion of specifically euro area aspects and challenges in subsequent parts of the report. In particular, it reviews the main ingredients of the pre-global financial crisis consensus on monetary-fiscal policy interactions and addresses significant new insights and refinements which have gained prominence since 2003. In doing so, the chapter distinguishes between general conceptual aspects – i.e. those aspects that pertain to an environment characterised by a single central bank and a single fiscal authority and those aspects that pertain to an environment characterised by a single central bank and many fiscal authorities (a multi-country monetary union). ...
JEL Code
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
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
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
28 January 2021
OCCASIONAL PAPER SERIES - No. 255
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Abstract
In response to the economic fallout from the coronavirus (COVID-19) pandemic, the European Council agreed on the Next Generation EU (NGEU) instrument. NGEU allows the European Commission to issue debt to finance grants and loans to EU Member States, with the disbursement of funds intended to be weighted towards the countries most affected by the crisis. This paper assesses the macroeconomic impact on the euro area of different uses of NGEU, using a large dynamic stochastic general equilibrium (DSGE) model of the euro area and global economy (EAGLE) that has been adapted to reflect the modalities of the NGEU instrument. Three uses of NGEU loans and grants are explored: (i) productive public investment, (ii) unproductive government spending, and (iii) replacing or repaying existing sovereign debt. The EAGLE results are cross-checked with a semi-structural model (ECB-BASE) and with the basic model elasticities (BMEs) of the forecasting models in use in the national central banks of the Eurosystem.
JEL Code
C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E65 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Studies of Particular Policy Episodes
F54 : International Economics→International Relations, National Security, and International Political Economy→Colonialism, Imperialism, Postcolonialism
F47 : International Economics→Macroeconomic Aspects of International Trade and Finance→Forecasting and Simulation: Models and Applications
31 January 2017
OCCASIONAL PAPER SERIES - No. 182
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Abstract
This paper analyses the appropriateness of the euro area fiscal stance. In this context, the paper presents the relevant definitions and how the euro area fiscal stance has evolved over time. Furthermore, it contains an evaluation of the appropriateness of the euro area aggregated fiscal stance set out in the European Commission
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