2,243 research outputs found

    EU fiscal rules: issues and lessons from political economy

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    The paper analyses the EU fiscal rules from a political economy perspective and derives some policy lessons. Following a literature survey, the paper stresses the importance of appropriate incentives for rule compliance in an environment where national fiscal sovereignty precludes the option of centralised enforcement. In addition, the paper stresses the importance of clear and simple rules and in particular the 3% deficit limit in anchoring expectations of fiscal discipline and facilitating public and market monitoring of public finances. This, in turn, strengthens incentive for rule compliance. Moreover, the paper discusses the interests of the most important players in European fiscal rule formation and the importance of choosing the appropriate time for initiating a reform debate. JEL Classification: D7, H3, H6deficits, fiscal rules, institutional reform, political economy, Stability and Growth Pact

    Antidumping enforcement in the European Community

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    In the European Community (EC), as in the United States,"injury"is what antidumping is all about. Antidumping laws are a flexible tool for preventing imports from displacing domestic production in politically influential industries. The vehicle for achieving that goal in the EC, however, is not protectionist rules, as in the United States, but protectionist discretion. The empirical results of this study have implications for EC trade policy after 1992. If protectionist interests demand compensation for the abolition of national protectionist barriers after 1992, EC antidumping measures offer them considerable scope for achieving their goals since measures are largely determined by political discretion. Antidumping measures could therefore become a pinnacle of"Fortress Europe". The results also suggest certain strategic considerations for the trade policy of developing countries. The authors argue that antidumping measures affecting developing countries are concentrated in industries with shifting comparative advantage, such as steel products, basic chemicals, and synthetic fibers. And such protection is more likely in sectors with strong, politically influential interest groups.TF054105-DONOR FUNDEDOPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Environmental Economics&Policies,Trade Policy,Access to Markets

    The fiscal costs of financial instability revisited

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    This paper conducts a comprehensive analysis of the fiscal costs of financial instability (defined as major asset price changes and including, as extreme cases, financial crises). The study identifies three channels to fiscal accounts: 1) revenue effects on capital gains, asset turnover and consumption tax, 2) bailout costs as asset price declines undermine balance sheets of companies/banks, and 3) second-round effects from asset prices changes via the real economy and via debt service costs. A panel analysis and case studies show that episodes of financial instability increase the variability of fiscal balances. Moreover, fiscal costs are often very large and much larger than assumed in the literature so far with public debt rising by up to 50% of GDP during such episodes. These fiscal effects can also serve as a, so far under-emphasised, rationale for the deficit and debt targets in the EU?s Maastricht Treaty and Stability and Growth Pact. JEL Classification: H3, H6, E6asset prices, deficits, financial crisis, financial stability, Fiscal policies

    Trade polices for electronic commerce

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    Some countries in the World Trade Organization initially opposed WTO's decision to exempt electronic delivery of products from customs duties, out of concern for the revenue consequences. Others supported the decision as a means of securing open trading conditions. The authors argue that neither the inhibitions nor the enthusiasm is fully justified. First, even if all delivery of digitizable media products moved on-line--an unlikely prospect--the revenue loss for most countries would be small. More important, however, the prohibition of customs duties does not ensure continued open access for electronically delivered products and may even prompt recourse to inferior instruments of protection. Barrier-free electronic commerce would be more effectively secured by deepening and widening the limited cross-border trade commitments under the General Agreement on Trade in Services (GATS), and by clarifying and strengthening certain GATS disciplines.Payment Systems&Infrastructure,Economic Theory&Research,Environmental Economics&Policies,Transport and Trade Logistics,Common Carriers Industry,Economic Theory&Research,Environmental Economics&Policies,Transport and Trade Logistics,Trade and Services,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

    Structural balances and revenue windfalls: the role of asset prices revisited

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    In this paper we revisit one of the “missing links” between budget balances and the economic cycle, namely the impact of asset prices on fiscal revenues. We estimate revenue elasticities with respect to equity and real estate price indices for 16 OECD countries, as well as for a synthetic euro area aggregate. For a sub-sample of euro area countries, we use these elasticities to investigate the impact of asset prices on budget balances and the assessment of the fiscal stance by adjusting existing estimates of cyclically adjusted balances for the asset price “cycle”. The results support the view that asset price movements are a major factor behind unexplained changes in the cyclically adjusted balance, which, if not accounted for, can lead to erroneous conclusions regarding underlying fiscal developments. JEL Classification: H2, H6, E6, G1asset prices, deficits, Fiscal policies, tax revenues

    Asset prices and fiscal balances

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    The paper argues that there are important links between asset prices and public finances which can strongly affect the variability of fiscal balances. Asset prices affect fiscal balances via capital gains and turnover related taxes, and via wealth effects on consumption and indirect taxes. The fiscal costs of asset price changes can be higher if government can be held liable for balance sheet losses from an asset price downturn. An empirical study finds significant effects of house and/or stock prices on revenue in a majority of the 17 OECD countries and revenue categories examined. On average, a 10-percent change in real estate and stock prices has a similar effect on the fiscal balance as a 1-percent change in output, although effects differ considerably across countries. By 2001-2002, some countries' fiscal balances seem upward biased, due to positive effects from earlier asset price booms. JEL Classification: H3, H6, E6, G1

    The Size of Government

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    We discuss and provide an overview of the size and role of the government, notably in terms of what the government “should” do, how the government could spend and intervene in the economy, how much governments spend and what they spend their money on. This is done from a historical perspective and also in a stylized way via assessing total expenditure, the composition of public expenditure for advanced, emerging and developing countries.info:eu-repo/semantics/publishedVersio

    The boom-bust cycle in Finland and Sweden 1984-1995 in an international perspective

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    This paper compares the boom-bust cycle in Finland and Sweden 1984-1995 with the average boom-bust pattern in industrialized countries as calculated from an international sample for the period 1970-2002. Two clear conclusions emerge. First, the Finnish-Swedish experience is much more volatile than the average boom-bust pattern. This holds for virtually every time series examined. Second, the bust and the recovery in the two Nordic countries differ markedly more from the international pattern than the boom phase does. The bust is considerably deeper and the recovery comes earlier and is more rapid. We explain the highly volatile character of the Finnish and Swedish boom-bust episode by the design of economic policies in the 1980s and 1990s. The boom-bust cycle in Finland and Sweden 1984-1995 was driven by financial liberalization and a hard currency policy, causing large pro-cyclical swings in the real rate of interest transmitted via the financial sector into the real sector and then into the public finances. JEL Classification: E32, E62, E6

    Market access advances and retreats : the Uruguay Round and beyond

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    In the Uruguay Round negotiations, trade distorting agricultural policies were taken up substantively for the first time in any round of multi-lateral trade negotiations. Voluntary export restraints outside the Multifibre Arrangement (MFA) were in fact eliminated. Developing countries became equal partners with developed countries. Their tariff cuts covered as large a share of imports as those of the developed countries and were deeper. Because developing country tariffs were higher to start with, their cuts will save importers more (perdollar of imports covered) than will cuts by developed countries. Tariff bindings for most developing countries, although often above applied rates, were extended to 90 percent or more of imports. Few countries agreed to give foreigners unlimited market access in services, or full national treatment in more than a few service activities. But developed countries agreed to some liberalization of cross-border provision for 70 percent of service activities (compared with 25 percent in developing countries). Less positively, although trade restrictions on agricultural products were converted to tariffs, border protection was reduced less on agricultural than on industrial products, and there was little agreement on reducing trade-affecting subsidies. The textiles and clothing agreement binds developed countries to eliminate all MFA-sanctioned restriction but allows them to largely put off doing so until 2005. Concessions to which developing countries agreed are due now. Reciprocal concessions of particular interest are due in the future (elimination of the MFA) or yet to be negotiated (liberalization of agricultural trade). Also disquieting, since the Uruguay Round, developing countries have undertaken anti-dumping cases at a rate (per dollar of imports) three times higher than that for the United States--mostly against other developing countries.Economic Theory&Research,Rules of Origin,Export Competitiveness,Environmental Economics&Policies,Globalization and Financial Integration,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Rules of Origin,Export Competitiveness,World Trade Organization

    Sovereign Risk Premiums in the European Government Bond Market

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    This paper provides a study of bond yield differentials among EU government bonds issued between 1993 and 2005 on the basis of a unique dataset of issue spreads in the US and DM (Euro) bond market. Interest differentials between bonds issued by EU countries and Germany or the USA contain risk premiums which increase with fiscal imbalances and depend negatively on the issuer's relative bond market size. The start of the European Monetary Union has shifted market attention to debt service payments as the key measure of indebtedness and eliminated liquidity premiums in the euro area
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