Expenditure reform in industrialised countries: a case study approach

This study examines reforms of public expenditure in industrialised countries over the past two decades. We distinguish ambitious and timid reformers and analyse in detail reform experiences in eight case studies of ambitious reform episodes. We find that ambitious reform countries reduce spending on transfers, subsidies and public consumption while largely sparing education spending. Such expenditure retrenchment is also typically part of a comprehensive reform package that includes improvements in fiscal institutions as well as structural and other macroeconomic reforms. The study finds that ambitious expenditure retrenchment and reform coincides with large improvements in fiscal and economic growth indicators. JEL Classification: H5, H6, O57case studies, debt, deficit, Economic Growth, Employment, expenditure reform, fiscal institutions, public expenditure

The design of fiscal rules and forms of governance in European Union countries

This paper uses a new data set on budgetary institutions in Europe to examine the impact of fiscal rules and budget procedures in EU countries on public finances. It briefly describes the main pattern of budgetary institutions and their determinants across the EU 15 member states. Empirical evidence for the time period 1985-2004 suggests that the centralisation of budgeting procedures restrains public debt. In countries with one-party governments or coalition governments where parties are closely aligned and where political competition among them is low, this is achieved by the delegation of decision-making power to the minister of finance. Fiscal contracts that require countries to set multi-year targets and that reinforce those targets increase fiscal discipline in countries with ideologically dispersed coalitions and where parties regularly compete against each other

Determinants of House Prices in Central and Eastern Europe

This paper studies the determinants of house prices in eight transition economies of central and eastern Europe (CEE) and 19 OECD countries. The main question addressed is whether the conventional fundamental determinants of house prices, such as GDP per capita, real interest rates, housing credit and demographic factors, have driven observed house prices in CEE. We show that house prices in CEE are determined to a large extent by the underlying conventional fundamentals and some transition-specific factors, in particular institutional development of housing markets and housing finance and quality effects.http://deepblue.lib.umich.edu/bitstream/2027.42/64380/1/wp894.pd

The Monetary Union: The Decade Ahead. The Case of Non-Member States

What are the prospects for New Member States to join the euro-zone in the not too distant future? They seem to be in a catch-22 situation Because of the current financial crisis some Maastricht criteria would be more difficult to fulfil in the short and medium term, which would make it hard for them to join the eurozone. But there is also an argument, which highlight benefits of a faster accession due to dynamic effects for the countries involved and for the eurozone as a whole.http://deepblue.lib.umich.edu/bitstream/2027.42/64421/1/wp947.pd

Competitiveness and growth in EMU: The role of the external sector in the adjustment of the Spanish economy

This paper assesses the relevance of the competitiveness argument in the debate on the current situation of the Spanish economy. We estimate error-correction models for exports and imports. Econometric analyses suggest that external demand and domestic activity are the more important determinants of net exports in the long run. However, where competitiveness is concerned, its impact on export growth in the short run appears to be higher than in the longer term. Moreover, during major downturns, the recovery of the Spanish economy has systematically been led by exports, which, in turn, has been associated with strong and rapid competitiveness gains, brought about by competitive devaluations. Since the exchange-rate instrument is not available anymore at national level, there is a case to assess the respective role of fiscal and structural policies in underpinning the recovery of the Spanish economy at the current juncture. The paper concludes that the room for manoeuvre for fiscal-policy stabilisation is currently very limited. In contrast, reducing the weight of distortionary taxes and/or increasing the weight of productive expenditures in a budget-neutral way would have positive impacts on potential growth. Boosting net-export growth crucially depends on the implementation of a comprehensive reform programme, within the framework of a broad social agreement, aiming at recovering competitiveness throughout enhancing competition, improving the functioning of labour and product markets, including the housing rental market, increasing physical, human and knowledge capital accumulation, promoting wage moderation and avoiding price-wage spirals. A pro-active role of the Spanish government in the social dialogue would provide guidance in the process and promote the agreementEMU, Spain, external imbalances, competitiveness, Martinez-Mongay, Maza Lasierra

Determinants of House Prices in Central and Eastern Europe

This paper studies the determinants of house prices in eight transition economies of central and eastern Europe (CEE) and 19 OECD countries. The main question addressed is whether the conventional fundamental determinants of house prices, such as GDP per capita, real interest rates, housing credit and demographic factors, have driven observed house prices in CEE. We show that house prices in CEE are determined to a large extent by the underlying conventional fundamentals and some transition-specific factors, in particular institutional development of housing markets and housing finance and quality effects.house prices, housing market, transition economies, central and eastern Europe, OECD countries

An Outline of a Progressive Resolution to the Euro-area Sovereign Debt Overhang: How a Five year Suspension of the Debt Burden Could Overthrow Austerity

The present study puts forward a plan for solving the sovereign debt crisis in the euro area (EA) in line with the interests of the working classes and the social majority. Our main strategy is for the European Central Bank (ECB) to acquire a significant part of the outstanding sovereign debt (at market prices) of the countries in the EA and convert it to zero-coupon bonds. No transfers will take place between individual states; taxpayers in any EA country will not be involved in the debt restructuring of any foreign eurozone country. Debt will not be forgiven: individual states will agree to buy it back from the ECB in the future when the ratio of sovereign debt to GDP has fallen to 20 percent. The sterilization costs for the ECB are manageable. This model of an unconventional monetary intervention would give progressive governments in the EA the necessary basis for developing social and welfare policies to the benefit of the working classes. It would reverse present-day policy priorities and replace the neoliberal agenda with a program of social and economic reconstruction, with the elites paying for the crisis. The perspective taken here favors social justice and coherence, having as its priority the social needs and the interests of the working majority

EU NEW MEMBER STATES HOUSEHOLDS‘ BANKING INDEBTEDNESS AND IT‘S IMPLICATIONS: AN OVERVIEW

During the period previous to the crisis, most of the EU new member states fromour research (especially Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania,Poland and Romania) have registered a fast growth of the households indebtedness, whichhas lead to the extension of the vulnerabilities of this sector in front of some macroeconomicshocks. In this context, our research aim to especially comparatively underline the stylisedfacts about the indebtedness degree of the households from the analysed countries and themain effects generated by the fast growth of the banking debts of this sector. Through theundertaken analysis in our research we aim at underling the major importance which theinsurance of a sustainable household‘s indebtedness level has for the macroeconomic andfinancial stability of a country.households‘ indebtedness, new EU member countries, vulnerabilities, loans to households,global crisis

The Fundamentals of the Portuguese Crisis

This paper analyses the fundamentals of the Portuguese crisis. The financial crisis of 2007 worsened and triggered the current Portuguese crisis. We argue that the main problem that the economy is facing is its output stagnation due to a kind of Dutch disease that has created high and increasing levels of indebtedness, low and decreasing levels of saving and has reduced Portuguese competitiveness. Moreover, the existence of a dualist labour market and a new vague of emigration reproduces inefficiency increasing unemployment of younger workers and the supply of human capital abroad funded by the Portuguese taxpayers. Governance problems such as bad public budget governance, lack of transparency and accountability are also at stake and have to be solved to allow the economy to return to its long-run growth path.Growth, Debt, Saving, Dutch disease, Unemployment, Budget policy.

The Social Costs of Unemployment: Accounting for Unemployment Duration

The social costs of unemployment, in terms of unemployment's impact on European citizens' life satisfaction, relate strongly to unemployment duration. At any level of general joblessness, reducing long-term unemployment is more important than reducing the number of people unemployed at any point in time.unemployment; unemployment duration; life satisfaction; happiness; social costs