Excessive Deficit Research Articles

The Determinants of Austerity in the European Union 2010-16

This paper aims at explaining what drove the adoption of austerity policies over the period 2010-16 in a panel of 28 European countries. Austerity is identified by year increases in the ratio between the structural primary balance and potential GDP. By means of principal component factor analysis we select the aggregate factors that might affect austerity, namely (i) fiscal consolidation (correction of high deficits and debts), (ii) market discipline (high sovereign spreads, low ratings), (iii) rule-based fiscal discipline (compliance with the Eurozone rules), and macroeconomic stabilisation (consideration for the cyclical position of the economy). Then we estimate a dynamic panel model with the system-GMM method. Results show that the most important contributions to austerity are provided by the market discipline and fiscal consolidation factors together with Excessive Deficit Procedures, with no significant role played by concomitant macroeconomic conditions. Overall, governments complied with orthodox fiscal principles and rules.

Unintended outcomes effects of the European Union and the International Monetary Fund on Hungary's public sector and administrative reforms

This article investigates European Union and International Monetary Fund influence on Hungary's public sector reforms in the period 2004–2013, that is, a time period that saw the initiation of the European Union's Excessive Deficit Procedure (the whole period) and an International Monetary Fund bailout programme (2008–2010). In this case, public sector reforms became derailed from the externally proposed trajectory and took the opposite direction: instead of fostering decentralization of the state administration and deepening the Europeanization process, Hungary's restructuring of the public sector delivered centralization and a ‘power grab’ that eventually impinged on some core values of the European Union ‘constitution’ (the acquis communautaire). This study aims to explain this empirical puzzle by in-depth analysis of how external influence was exerted and became interwoven with dynamically changing domestic factors in circumstances of conditionality. The research is framed by existing policy transfer and public sector reform theories. The article argues that the Hungarian case provides evidence of the unintended consequences of European Union-driven public sector reforms.

Las recientes reformas europeas en materia de libertad sindical y negociación colectiva: ¿Tiene algo que decir el Tribunal Europeo de Derechos Humanos?

En junio de 2012 la Unión Europea desembolsó 41,3 billones de Euros al gobierno español para cubrir las necesidades de liquidez de la banca. Dicho “rescate” no sólo comportó reformas relativas a la regulación del sector financiero. También trajeron las reformas laborales de 2010-2012 -que marcan un antes y un después en el modelo de Derecho Sindical en nuestro país- y que se originan en el contexto del procedimiento comunitario por déficit excesivo abierto a España. En el marco de dicho procedimiento, España debía abordar la reforma del sistema de relaciones laborales. Fue la Ley 3/2012, de 6 de julio, de medidas urgentes para la reforma del mercado laboral, la que dio cumplimiento a las condiciones impuestas por el Consejo Europeo.

How Informative are Real Time Output Gap Estimates in Europe?

We study the properties of the IMF-WEO estimates of real-time output gaps for countries in the euro area as well as the determinants of their revisions over 1994-2017. The analysis shows that staff typically saw economies as operating below their potential. In real time, output gaps tend to have large and negative averages that are largely revised away in later vintages. Most of the mis-measurement in real time can be explained by the difficulty in predicting recessions and by overestimation of the economy's potential capacity. We also find, in line with earlier literature, that real-time output gaps are not useful for predicting inflation. In addition, countries where slack (and potential growth) is overestimated to a larger extent primary fiscal balances tend to be lower and public debt ratios are higher and increase faster than projected. Previous research suggests that national authorities' real-time output gaps suffer from a similar bias. To the extent these estimates play a role in calibrating fiscal policy, over-optimism about long-term growth could contribute to excessive deficits and debt buildup.

THE IMPACT OF STOCK-FLOW ADJUSTMENTS ON CHANGES IN CROATIAN GENERAL GOVERNMENT DEBT LEVEL

Surveillance of government deficit and debt data is a very important issue from the point of view of national policy makers, as well as international financial and statistical organizations. Deficit and debt developments in EU member states has been regularly (twice a year) monitored by Eurostat, which collects and publishes so called excessive deficit procedure (EDP) statistics on government deficit and debt. The European Commission uses the EDP statistics to assess whether EU Member States' government deficits and debt levels comply with the relevant EU legislation (according to the Maastricht Treaty criteria, government deficit should be less or equal to 3% and government debt less or equal to 60%) of GDP. Deficit and debt data are published mostly in relative terms, i.e. compared with the nominal GDP and compiled according to the ESA2010 methodology. In simplified theory, annual government deficit/surplus should be equal to change in the level of government debt at the end of the actual year and at the end of the previous year. In reality, this is not true due to the impact of the stock-flow adjustments (SFA), which explains the difference between the change in government debt and the government deficit/surplus for a given year. Main aim of this paper is to identify the main factors contributing the changes in government debt other than deficit/surplus (SFA) in Croatia during the period 2010-2017. Those factors are divided into three main categories: net acquisition of financial assets (further broken down by financial instruments), adjustments (for coverage, valuation and exchange rate changes) and statistical discrepancies (reflects differences arising from the use of various data sources). Second, not less important aim of paper is to identify size and impact of the particular SFA factors on changes in debt level during the observed period in Croatia, and based on results obtained, short recommendations for Croatian policymakers will be outlined.

Determinants and implications of the eurozone enlargement

To join the Eurozone (EZ), a candidate country has to fulfil five nominal Maastricht convergence criteria and ensure compliance of national legislation with the acquis communautaire. With this regard special difficulties pose the fiscal criterion relating to the maximum allowed budget deficit of 3 per cent of GDP. If it is not met, the European Commission launches the Excessive Deficit Procedure. Currently, such formula applies to France, Spain and the United Kingdom. Although the issue is not absolutely certain, one can assume that euro will weather the present difficulties and will come out stronger, though the economically unjustified Euro scepticism of some countries is not helping. It may be expected that in the 2020s the European Monetary Union will be joined by all countries that are still using their national currencies and that the EU will be extended to include new member states, enlarging the euro area further. In this article authors are discussing the issue whether Poland will join the EZ in the coming years, considering the challenges of meeting all Maastricht criteria, on the one hand, and the reluctance of the government to give up the national currency, on the other. A mixed method combining the results of qualitative and quantitative research has been used to empirically verify the research question presented.

The role of family’s socio-economic status at stunting adolescences food intake in second growth spurt

Stunting is a chronic nutritional problem in various developing countries, including Indonesia. The purpose of this study was to analyze the socioeconomic role of families on macro and micro nutrient intake in adolescent stunting. This research is a quantitative study with cross sectional design on 52 adolescent stunting. Enforcement of a stunting diagnosis using WHO's anthroplus software. The data used are age, gender, and height with the results of Z score TB / U. Data analysis uses SPSS with chi-square test. The results of the descriptive analysis showed that the proportion of male stunting (46.2%) and female (53.8%) was almost the same. They consumed fat (44.2%) and protein (59.6%) excess but carbohydrate deficit (40.4%). While the amount of micronutrient intake is actually a deficit of both vitamin A (57.7%), Fe (92.3%), and Zn (86.5%). Parental education and work were not related to macronutrients and micronutrient adolescent intake of stunting (p> 0.05). The result of cross tabulation, the stunting of adolescents in socioeconomic status is not really getting good macro intake (60.7%). As for micro intake, at high socioeconomic status, less intake (79.2%). Parents pay more attention to the quality of adolescent food intake to maximize growth potential at the second growth acceleration.

Master's Thesis: Money and the Fiscal Space of Monetarily Sovereign Governments: The Case of Denmark

Since the global financial crisis ten years ago, a mature research programme has developed on the austerity policies imposed, especially in European states, to counter perceived threats from excessive public debt and deficits. While many scholars have criticised austerity for digging the hole deeper, fewer have provided clear alternatives. Yet, the economic school of Modern Money Theory encourages analysis into the operational realities of monetary systems to examine mechanisms, which allow countries with their own currency to spend unhindered. In this paper, the Danish monetary system is analysed to answer to what extent the Danish government is financially constrained and how economic policymaking in Denmark is aligned with the operational realities of the monetary system? First, the two main theories of money, metallism and chartalism, are reviewed to ground the analysis in a monetary ontology in coherence with historical and social scientific proof. The metallist theory conceives money as a market phenomenon, which emerged spontaneously from a money-less barter economy, while states later intervened and compromised the natural monetary system. However, empirical evidence favours chartalism, which takes money as inherently a political phenomenon devised by central authorities to access real resources by levying taxes to be paid in its own unit of account. However, the advent of independent central banking appears to have subjected governments to ‘market discipline’. This puzzle is investigated through a case analysis of the Danish monetary system. Six hypotheses derived from Modern Money Theory guides the analysis into the cooperation between Nationalbanken, the Ministry of Finance and the private banks who hold accounts with Nationalbanken. The monetary system is shown to be quite a closed arrangement, tightly controlled by Nationalbanken in its management of the liquidity in the system. Crucially it is argued that the state’s and Nationalbanken’s balance sheets ought to be viewed in consolidation as one, whereby money is a liability of the Danish government, not an asset to be obtained before spending is possible. The government’s fiscal space is determined by what is for sale in its own currency and not its tax revenues. This consolidated view is substantiated by Nationalbanken’s ongoing activity to establish a benevolent financial environment when the government sells bonds. Yet, Denmark may eventually face domestic constraints due to the self-imposed fixed exchange rate policy, if persistent balance of payment deficits return. Finally, a constructivist case analysis of the ‘Restoration Package’ of 2010 is conducted to highlight how misrepresentation of the government as a currency user, rather than issuer, facilitated the imposition of austerity and fortified a sound finance paradigm. The paradigm was shared by the oppositional coalition and prevented them from later achieving their goal of a strong, equitable recovery.

The Impact of Standardised fiscal rules index on the Yield on Ten-Year Government Bonds in the Visegrád Group Countries in 2005–2016

Purpose: The article analyzes the possible methods of public debt management, which not only aim to meet regulatory requirements but also obtain a market premium in the form of an optimal level of the yield on government bond yields that will be profitable for the issuer. The study analyzes the situation in the public finance sector in the countries that form the Visegrád Group (V4). The authors evaluate the main regulatory requirements of EU law in the area of numerical fiscal rules and their impact on the yield on basic securities such as ten-year government bonds, which directly influences the cost of servicing long-term public debt. Methodology: The study uses desk research method for theoretical reasoning to verify the research hypothesis. The study seeks to answer the question of whether the application of national and EU fiscal rules in V4 budgetary frameworks contributes to lower yields on ten-year bonds and thereby reduces the cost of public debt. The authors utilize time series and cause-effect analysis as well as quantitative research for the systematization of statistical information and regression analysis for the examination of statistical dependencies. Findings: The basic parameters subject to financial assessment within the fiscal rules index are (1) the deficit of public finance sector and (2) public debt with its servicing costs. In 2005–2016, the ratio of the public finance sector deficit to GDP was shaped in such a way that most V4 countries required the institution of excessive deficit procedures and further disciplinary regulations. The assessment of the situation in the public finance sector in the area of budget deficit and public debt does not translate into the yield on government bonds of non-Eurozone countries. Model-based testing indicates that the financial markets – when deciding to evaluate or purchase government bonds of non-Eurozone countries – failed to acknowledge the implementation of fiscal rules in these countries and its possible effects. Originality: The study focuses on a unique comprehensive analysis of national fiscal rules employed in individual V4 countries and their impact on the yield on government bonds throughout the entire EU membership of the V4. What holds the greatest cognitive value in this article is the answer to the question of whether Eurozone membership impacts the valuation of a country’s public debt.

Intergenerational conflict and public sector size and structure: A rationale for debt limits?

How do budget rules influence the size and structure of the public sector? This question is considered in an overlapping generations political economy model. The different horizons of agents influence their voting behaviour and lead to excessive deficit financing and debt accumulation, reducing welfare of all subsequent generations. Along an equilibrium trajectory with increasing debt, the tax burden increases and public sector activities are crowded out due to the increasing costs of debt servicing. A debt ceiling may halt this process leading to less debt, more public consumption and higher welfare.

No direct influence of EU on domestic consolidation and reform: two fiscal ‘hardliners’, Netherlands and Estonia

ABSTRACTIn the Netherlands and Estonia, the European Union (EU) did not exert direct influence on domestic fiscal consolidation. They managed to resolve their fiscal crises and balance their budgets without external financial assistance, thanks to strict fiscal discipline. Yet, domestic consolidations in both countries were to some extent influenced by the EU. The Netherlands was subject to excessive deficit procedure. Estonia was indirectly influenced because of its top priority to join the Eurozone. This paper begins with a conceptual look at EU influencing. Then, fiscal discipline and consolidation in the Netherlands and Estonia are explored, especially their similarities and differences.

Determinants and implications of the Eurozone enlargement

Aside from the United Kingdom, which is withdrawing from the European Union, only Denmark has the option of staying outside the single European currency area. All other member states which have not adopted euro as their currency have the right and obligations to do so under the Treaty of Accession. The condition to join the Eurozone is to meet all five nominal Maastricht convergence criteria and to ensure compliance of national legislation with acquis communautaire, or the EU legal order. What poses special difficulties to candidate countries is the fiscal criterion relating to the maximum allowed budget deficit. If it’s not met, the European Commission launches the Excessive Deficit Procedure, EDP. Currently, this procedure is in place for France, Spain and the United Kingdom. In 2015, EDP for Poland was lifted, but there is no certainty it won’t be imposed again at the end of the decade due to the risk of exceeding once more the threshold of public sector deficit, which stands at 3 percent GDP. It is to be expected that in the 2020s the European Monetary Union will be joined by all the countries that are still using their national currencies, including Denmark, and that the EU will be extended to include new member states, enlarging the euro area, too. Although the issue is not absolutely certain, it needs to be assumed that euro will overcome the present difficulties and come out stronger, though the economically unjustified euroskepticism of some countries, especially Poland, is not helping.

On the source of U.S. trade deficits: Global saving glut or domestic saving drought?

Are U.S. trade deficits caused by high foreign saving—a global saving glut—or low domestic saving—a domestic saving drought? To answer this question, I conduct a wedge accounting analysis of U.S. trade balance dynamics during 1995–2011 using a dynamic general equilibrium model. I find that a global saving glut explains 96 percent of U.S. trade deficits in excess of those that would have occurred naturally as a result of productivity growth and demographic change. Contrary to widespread belief, however, investment distortions, not a global saving glut, account for much of the decline in real interest rates that has accompanied U.S. trade deficits.

Independent fiscal councils: Recent trends and performance

Countries increasingly rely on independent fiscal councils to constrain policymakers’ discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and possibly less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.

A Framework to Assess Fiscal Vulnerability: Empirical Evidence for European Union Countries

Following the financial crisis of 2007 and the sovereign debt crisis in 2010 that affected the soundness and reduced the strength of public finance in European countries, there has been a growing interest in developing methodologies to the help assess and signal the vulnerability of fiscal policy. Therefore, the aim of this study is to develop a new framework (V-L-D) to assess fiscal vulnerability. V-L-D represents a new methodology on the measurement of fiscal vulnerability that relies on the assumption that vulnerability can occur even during calm times. In comparison with previous methodologies that studied fiscal vulnerability around crisis and fiscal distress times, our framework investigates fiscal vulnerability near fiscal adjustments episodes. Our methodology relies on two distinct indicators: one showing the vulnerabilities indicated by the level of the cyclically adjusted budget balance and distance-to-stability, and one showing the vulnerabilities pointed out through the changes of the cyclically adjusted budget balance and public debt. V-L-D is able to classify fiscal vulnerability into five distinct categories having scores from 0 (no fiscal vulnerability) to 4 (extreme fiscal vulnerability). Using annual data ranging over 1990–2013 for 28 European Union countries, we evidenced 310 episodes of fiscal vulnerability, out of which 128 episodes of low vulnerability, 94 of moderate, 62 of strong, and 26 of extreme fiscal vulnerability. We also found that over 2004–2013, Greece, Portugal, Romania, United Kingdom, Ireland, Spain, and Slovenia were the most fiscally vulnerable countries in the Union. United Kingdom and Greece went through the longest episodes of fiscal vulnerability, counting 12 and 11 consecutive years, respectively. We tested our framework’s effectiveness against the Excessive Deficit Procedure. We found that the overall performance is good: V-L-D assessed moderate fiscal vulnerability during the procedure, strong fiscal vulnerability in the first year when procedure was initiated, and extreme vulnerability one year before the initiation.

SPX Flow Inc, USA

Countries increasingly rely on independent fiscal councils to constrain policymakers’ discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and possibly less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.

Optimal Capital Buffers of Sovereign Debt Management Offices

We model a sovereign debt manager who has a prediction of the budget deficit and needs to raise debt at the beginning of the budget period. In this setting, the sovereign may issue debt in excess of expected funding needs – a precautionary cash buffer – as a measure of self-insurance against the potential cost of inter-temporal funding. Based on budget deficit predictions that are reported under the EU’s Stability and Growth Pact and Excessive Deficit Procedure, as well as historical budget deficit data, we provide an empirical assessment of optimal cash buffers for a panel of EU countries.

Magnetic resonance spectroscopy in evaluating cerebral metabolite imbalance in chronic obstructive pulmonary disease

RationaleMagnetic resonance spectroscopy (MRS) is a powerful research tool and has been proved to provide additional clinically relevant information for several diseases such as brain tumors, metabolic disorders, and systemic diseases.AimThe aims of this study were to evaluate cerebral metabolic imbalance in chronic obstructive pulmonary disease (COPD) and to correlate the abnormalities with spirometric and gasometric parameters.Patients and methodsIn a case–control study, eight COPD patients and eight age-matched and sex-matched healthy control individuals were compared. 1H-MRS was performed using 1.5-T MRI/MRS scanner. Using 1H-MRS single-voxel technique, N-acetyl aspartate/choline (NAA/Cho), choline/ creatine (Cho/Cr), and N-acetyl aspartate/creatine (NAA/Cr) ratios were estimated and compared in both groups.ResultsThere were significant differences regarding the distribution of neurotransmitters in the temporal lobe only between COPD and control groups; there were significant positive correlations between the NAA/Cho ratio at the thalamus with both partial pressure of arterial carbon dioxide and base excess or base deficit. However, there was a significant positive correlation between the Cho/Cr ratio at the thalamus and forced vital capacity (l), and a significant positive correlation between the NAA/Cr ratio at the thalamus andBMI, and a negative correlation between the NAA/Cr ratio at the thalamus and partial pressure of arterial oxygen. There was a significant negative correlation between theNAA/Cr ratio at the temporal lobe and partial pressure of arterial carbon dioxide.ConclusionMRS provided an insight to study the neurochemical changes that occur in COPD patients. Chronic hypoxemia and hypercapnia seem to play a key role in the pathophysiology of neurochemical changes in COPD.

Independent Fiscal Councils: Recent Trends and Performance

Countries increasingly rely on independent fiscal councils to constrain policymakers' discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and possibly less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.

Independent Fiscal Councils: Recent Trends and Performance

Countries increasingly rely on independent fiscal councils to constrain policymakers’ discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.