Are the effects of fiscal changes different in times of crisis and non-crisis? The French Case

This paper shows that the impact of changes in budgetary variables on major macroeconomic variables varies in sign and magnitude in times of crisis and non-crisis in France. We find that these nonlinearities are both frequent (as they exist on all behaviors analyzed: real GDP, private consumption, business investment and private employment) and significant. For this, we estimate time-varying probability Markov-switching models (TVPMS) in order to take into account two budgetary regimes, on the one side periods of severe recessions or depressions (crises), and, on the other side "normal" periods (expansions or moderate recessions). These two regimes are identified endogenously, so that we do not need to preliminary separate episodes of huge contractions and expansions of the business cycle. Further, we are able to identify the variables influencing the probability of a switch between regimes. Searching for nonlinear fiscal impacts in the form of regime-switching effects, we assume temporary variations in the budgetary variables, both on the revenue side (taxes on consumption, on firm's profit, lump sum transfers) and on the expenditure side (traditional public boosts of aggregate demand, transfers, and subsidies). Our results show that if one considers the aggregate GDP, public expenditure has a stronger impact during crisis and the expenditure multiplier is greater than the tax multiplier. Also, when households are sensitive to the unemployment situation, tax cuts do not increase consumption spending, while transfers are playing a significant role. On the firms side, our results show that direct taxes changes induce a (stimulus) effect in the investment rate only during non-crisis periods. A rise in subsidies has a negative influence during crises. Finally, the estimates suggest that employment policies should be asymmetric: fiscal measures aiming at reducing unit labor costs could be efficient in good times, while an increase in public employment is preferable during crisis.Markov-Switching Models, Fiscal Policy, Crisis.

La croissance tendancielle des dépenses de santé : un problème sensible pour les finances publiques des pays développés.

De nombreux pays, dont la France, ont entrepris des réformes davantage orientées vers des solutions microéconomiques pour faire face à la hausse tendancielle des dépenses de santé.

New challenges for public debt in advanced economies Summary of the conference held in Strasbourg on 16-17 September 2010.

On 16-17 September 2010, the Banque de France’s Directorate General Economics and International Relations and the Bureau d’économie théorique et appliquée (BETA) of Strasbourg University jointly hosted a conference on the topic “New challenges for public debt in advanced economies” that brought together 70 economists from French and foreign universities, ESCB and other central banks, and European and international institutions.public debt, governance, financial markets, fiscal policy.

Quels indicateurs budgétaires pour quels objectifs de politique économique ?

L’emploi croissant des indicateurs budgétaires — sur la situation, l’orientation et la soutenabilité des finances publiques — dans la conduite de la politique économique réclame un éclaircissement sur leurs usages et leurs limites.indicateurs budgétaires, soutenabilité, politique budgétaire.

Nouveaux défis pour la dette publique dans les pays avancés : synthèse du colloque tenu à Strasbourg les 16 et 17 septembre 2010.

Les 16 et 17 septembre 2010, la Direction générale des Études et des Relations internationales a organisé en collaboration avec le Bureau d’économie théorique appliquée (BETA) de l’université de Strasbourg une conférence réunissant 70 économistes issus du monde académique français et étranger, de banques centrales du SEBC ou d’ailleurs et d'institutions européennes et internationales sur le thème « Nouveaux défis posés par la dette publique dans les pays développés ».Dette publique, gouvernance, marchés financiers,politique budgétaire.

Fiscal Multipliers and Public Debt Dynamics in Consolidations

The success of a consolidation in reducing the debt ratio depends crucially on the value of the multiplier, which measures the impact of consolidation on growth, and on the reaction of sovereign yields to such a consolidation. We present a theoretical framework that formalizes the re spo nse of the public debt ratio to fiscal consolidations in relation to the value of fiscal multipliers, the starting debt level and the cyclical elasticity of the budget balance. We also assess the role of markets confidence to fiscal consolidations under al ternative scenarios. We find that with high levels of public debt and sizeable fiscal multipliers , debt ratios are likely to increase in the short term in response to fiscal consolidations. Hence, the typical horizon for a consolidation during crises episo des to reduce the debt ratio is two - three years , although this horizon depends critically on the size and persistence of fiscal multipliers and the reaction of financial markets. Anyway, such undesired debt responses are mainly short - lived. This effect is very unlikely in non - crisis times, as it requires a number of conditions difficult to observe at the same time , especially high fiscal multipliers

Debt retrenchment strategies and control of public spending.

Faced with excessive government debt, several countries have launched comprehensive structural reforms to consolidate their public finances. Drawing on the experiences of foreign countries, this article shows that control of public spending, in particular the implementation of fiscal rules for public spending, has played a key role in the fiscal consolidation process..