Discretionary fiscal policy in the Euro area: past, present, future

Francesco Caprioli (), Marzia Romanelli and Pietro Tommasino
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Francesco Caprioli: Bank of Italy

No 398, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The depth and the length of the recent crisis prompted a more positive re-assessment of a countercyclical fiscal stance, especially in the euro area. Against this background, we look at discretionary fiscal policy in the euro area from three different perspectives. First, we provide evidence that the discretionary fiscal policy in euro-area countries has been mostly a-cyclical even if our estimates suggest that using it counter-cyclically could have been useful, particularly during the crisis. Second, focusing on the short-run � i.e. taking as given the economic and institutional constraints that currently make a significant fiscal expansion quite unrealistic in Europe � we discuss some budget-neutral proposals aimed at fostering economic growth. Finally, taking a more forward-looking perspective, we discuss the issue of the appropriate fiscal stance for the euro area as a whole, and argue that the advantages of having a coordinated approach (e.g. through a centralized fiscal capacity) can be substantial.

Keywords: discretionary fiscal policy; automatic stabilizers; European Monetary Union (search for similar items in EconPapers)
JEL-codes: E62 H87 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-mac and nep-pbe
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_398_17

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