Useful Government Spending, Direct Crowding Out and Fiscal Policy Interdependence.

This paper introduces perfect substitutability between private and public consumption in a dynamic, open economy with imperfect competition and nominal rigidities. This implies a direct crowding-out effect that, generalizing to the two-country case some well-known properties of a closed economy, tends to reduce consumption following both domestic and foreign expansions. A less expected result is that sub-stitutability has a positive effect on the short-run output spillover.COMPETITION ; PRICES ; FISCAL POLICY

The Economic Adjustment Program for Portugal : assessing welfare impact in a heterogeneous-agent framework

The sovereign debt crisis, triggered by the 2007-08 global financial cri- sis, has affected several European Union (EU) countries, leading to unprecedented financial assistance programs. In May 2011, the Portuguese Government set an agreement with the Troika (a supranational institution composed by the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF)), through which, in exchange for external help, the Portuguese author- ities committed to an Economic Adjustment Program (EAP). In order to assess the impacts of the EAP on welfare and, in particular, on inequality, this paper simulates the debt consolidation strategy proposed by the Troika using a general equilibrium model with heterogeneous agents. The model enables to explore the impacts of the fiscal adjustment on the endogenous cross-section distribution of income, wealth and welfare. Our results predict a positive net welfare gain, despite the existence of sig- nificant transition costs in terms of output losses and inequality, especially during the first years of implementation. Overall, the net positive welfare gains are biased towards the poorer, which means that the consolidation plan will be, in the end, equality-enhancing. These results reflect the instruments involved in the consolida- tion strategy: productive and unproductive expenditure cuts combined with a slight increase in social transfers. Furthermore, the simulation predicts a positive impact on the Portuguese net foreign asset (NFA) position. Assuming this prediction is correct, this strongly supports the motivation for the adoption of the Economic Adjustment Program which considers the large external indebtedness of Portugal as a central issue in the economic diagnosis.info:eu-repo/semantics/publishedVersio

Macro-Fiscal Policy Challanges and Public Investment in the New EU Member States

Most new EU member states (NMS) need further fiscal adjustment to support economic growth and macroeconomic stability. In this context, achieving income convergence with other EU members rests more with maintaining productivity growth, attracting foreign savings, and improving investment efficiency than with increasing government spending (including for infrastructure). Additional institutional fiscal reforms, aimed at improving expenditure efficiency and facilitating private sector investment, will be needed to support these objectives. However, further fiscal adjustment and reforms do not necessarily need to depress public investment. New financing options for public investment \u2013 including from various EU funds and through public-private partnerships \u2013 can ease existing fiscal and macroeconomic constraints, but present both new opportunities and challenges that need to be handled carefully

Fiscal Policy and Public Investment in the New EU Member States

This paper looks at fiscal adjustment and public investment issues in European New Member Stase (NMS), and the role of EU support and PPPs to develop infrastructure. In particular, the paper aims to address three specific issues: \u2022 First, what does the evidence suggest regarding the impact of fiscal adjustment on public investment levels? \u2022 Second, where do NMS stand with respect to infrastructure indicators and what could be the role of EU funds in providing resources for needed investment? \u2022 Third, how could NMS improve the institutional environment for PPPs to capitalize on efficiency gains and manage fiscal risks in an effective way? NMS face important challenges to upgrade infrastructure. The paper suggests that the experience with fiscal adjustment and public investment has been fairly mixed. Some countries have resorted to investment cuts to consolidate fiscal positions, while others have been more successful in both accommodating higher levels of investments and reducing fiscal imbalances. Still, to support growth and development, additional investment is needed across the region, particularly in productive infrastructure, even in a context of tight budgets. In this regard, new available financing presents both opportunities and challenges, requiring improvements in the institutional framework for investment and PPPs. In the case of EU funds, absorbing the substantial additional resources under the new financial perspective will demand important efforts to reallocate expenditures and to step up absorptive capacity. Similarly, while PPPs provide a promising route for channeling more resources into infrastructure investment, strengthening the institutional framework for PPPs and limiting incentives to simply move investment off budget is crucial to deliver on the expected benefits and manage the fiscal risks that come from private participation in infrastructure

Useful government spending, direct crowding-out and fiscal policy interdependence

SIGLEAvailable from British Library Document Supply Centre-DSC:9261.960(547) / BLDSC - British Library Document Supply CentreGBUnited Kingdo

Dynamic general equilibrium analysis The open economy dimension

Also available via the InternetAvailable from British Library Document Supply Centre-DSC:3597.9512(no 3540) / BLDSC - British Library Document Supply CentreSIGLEGBUnited Kingdo