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Christiane Nickel
Economics
- Current Position
-
Deputy Director General
- Fields of interest
-
Macroeconomics and Monetary Economics,Mathematical and Quantitative Methods,International Economics
- Education
- 1996-2000
PhD in Economics from Wissenschaftliche Hochschule für Unternehmensführung Koblenz – Otto Beisheim Graduate School, Summa cum laude
- 1990-1995
Diploma in Economics, Johann Wolfgang Goethe-Universität Frankfurt am Main, Summa cum laude
- Professional experience
- 2022-
Deputy Director General Economics, European Central Bank
- 2014-2022
Head of Division Prices & Costs, European Central Bank
- 2012-2013
Head of Section Output, Demand and Labour Markets, European Central Bank
- 2007-2012
Head of Fiscal Analysis Section, European Central Bank
- 2006
Senior Economist, European Bank for Reconstruction and Development
- 2003-2005
Senior Economist, European Central Bank
- 2000-2002
Economist, International Monetary Fund, Washington DC
- 1996-1999
Junior Faculty Member, Chair of Macroeconomics and International Economics, WHU Koblenz, Otto Beisheim Graduate School of Management
- 1995-1998
Book Reviewer, Economics Section, Frankfurter Allgemeine Zeitung
- Teaching experience
- 2011-2012
Lecturer for “Fiscal Policy in EMU: Theory and Practice”, Goethe University, Frankfurt am Main
- 2002
Lecturer for “Assessing Financial Sector Stability” and “Inflation Targeting”, IMF Institute, Singapore
- 1996-1999
Lecturer for “Microeconomics” and “European Economic Integration”, WHU Koblenz
- 18 December 2023
- THE ECB BLOGDetails
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
Q50 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→General
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
Q51 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Valuation of Environmental Effects
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
- 23 May 2023
- WORKING PAPER SERIES - No. 2821Details
- Abstract
- Understanding of the macroeconomic effects of climate change is developing rapidly, but the implications for past and future inflation remain less well understood. Here we exploit a global dataset of monthly consumer price indices to identify the causal impacts of changes in climate on inflation, and to assess their implications under future warming. Flexibly accounting for heterogenous impacts across seasons and baseline climatic and socio-economic conditions, we find that increased average temperatures cause non-linear upwards inflationary pressures which persist over 12 months in both higher- and lower-income countries. Projections from state-of-the-art climate models show that in the absence of historically un-precedented adaptation, future warming will cause global increases in annual food and headline inflation of 0.92-3.23 and 0.32-1.18 percentage-points per year respectively, under 2035 projected climate (uncertainty range across emission scenarios, climate models and empirical specifications), as well as altering the seasonal dynamics of inflation. Moreover, we estimate that the 2022 summer heat extreme increased food inflation in Europe by 0.67 (0.43-0.93) percentage-points and that future warming projected for 2035 would amplify the impacts of such extremes by 50%. These results suggest that climate change poses risks to price stability by having an upward impact on inflation, altering its seasonality and amplifying the impacts caused by extremes.
- JEL Code
- Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
- 24 February 2023
- THE ECB BLOGDetails
- JEL Code
- E30 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→General
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
Related- 1 March 2023
- THE ECB BLOG
- 2 December 2021
- WORKING PAPER SERIES - No. 2619Details
- Abstract
- Endogeneity of the labour market slack in reduced-form Phillips Curves (PCs) is usually addressed either by including proxies for omitted supply shocks, or by using instrumental variables. Using the Kiviet (2020) Kinky Least Squares estimator, we find evidence that supply-shock proxies should not be omitted from PCs, and that many popular instrumental variables seem to be invalid. We estimate a standard backward-looking wage Phillips Curve by Kinky Least Squares and find that unless a large negative correlation between the slack variable and the error term is assumed, the coefficient of the slack variable is significantly negative.
- JEL Code
- C1 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 280Details
- Abstract
- From 2013 up to the launch of the ECB’s strategy review in January 2020, inflation in the euro area was low and over-predicted. This low inflation during the years 2013-19 can be attributed to a combination of interconnected factors. Cyclical developments account for a substantial share of the fall in underlying inflation, mainly in the first part of the low inflation period. Additionally, there is evidence that an underestimation of the amount of economic slack and less well-anchored longer-term inflation expectations, in combination with monetary policy in the euro area being constrained by the effective lower bound, have played an important role in the long period of subdued inflation. Ongoing disinflationary structural trends (such as globalisation, digitalisation and demographic factors) are likely to have had a dampening effect on inflation over the last few decades, but were in themselves not the main drivers of low inflation in the euro area from 2013 to 2019. However, as they could not have been easily offset by interest rate policy in an effective lower bound environment, they might also have contributed to the more subdued inflation dynamics in the euro area from 2013 to 2019.
- JEL Code
- C51 : Mathematical and Quantitative Methods→Econometric Modeling→Model Construction and Estimation
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
F62 : International Economics→Economic Impacts of Globalization→Macroeconomic Impacts
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 279Details
- Abstract
- The existence of nominal rigidities and inflation differentials between countries offers two of the main rationales for an inflation buffer in a monetary union where monetary policy is oriented towards an area-wide inflation objective. Evidence accumulated since 2003 suggests that nominal rigidities remain a prevalent feature of the euro area, with some differences as regards prices and wages. Price setting may have become more flexible and there is no evidence for any especially strong downward rigidities in price setting. At the same time, persistent downward nominal wage rigidity (DWR) provides a strong argument for a positive inflation buffer to “grease the wheels” of the euro area economy – also in order to avoid the risk of macroeconomic adjustments being managed in terms of quantities (unemployment) rather than prices when DWR is binding and particularly when productivity growth is low. Inflation differentials across euro area countries have tended to be small but persistent. For inflation dispersion in the euro area, the across countries has been more important than across regions, confirming that an inflation buffer might be especially important in a monetary union of different countries. Overall, inflation differentials were due to the rise of economic and financial imbalances in the first decade of the euro and the subsequent need for adjustment. Balassa-Samuelson effects which were highlighted in the 2003 strategy review were only a minor factor. By and large, the ECB’s inflation objective seems to have provided a sufficient margin to prevent countries from having to live with prolonged periods of excessively low inflation rates in the period 1999-2019. There were some exceptions in the second decade of the euro (from 2009-2019), when inflation in the euro area was, overall, substantially lower than during the first decade.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 265Details
- Abstract
- This paper – which takes into consideration overall experience with the Harmonised Index of Consumer Prices (HICP) as well as the improvements made to this measure of inflation since 2003 – finds that the HICP continues to fulfil the prerequisites for the index underlying the ECB’s definition of price stability. Nonetheless, there is scope for enhancing the HICP, especially by including owner-occupied housing (OOH) using the net acquisitions approach. Filling this long-standing gap is of utmost importance to increase the coverage and cross-country comparability of the HICP. In addition to integrating OOH into the HICP, further improvements would be welcome in harmonisation, especially regarding the treatment of product replacement and quality adjustment. Such measures may also help reduce the measurement bias that still exists in the HICP. Overall, a knowledge gap concerning the exact size of the measurement bias of the HICP remains, which calls for further research. More generally, the paper also finds that auxiliary inflation measures can play an important role in the ECB’s economic and monetary analyses. This applies not only to analytical series including OOH, but also to measures of underlying inflation or a cost of living index.
- JEL Code
- C43 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Index Numbers and Aggregation
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
C82 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Methodology for Collecting, Estimating, and Organizing Macroeconomic Data, Data Access
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 25 March 2020
- WORKING PAPER SERIES - No. 2382Details
- Abstract
- Can the aging process affect inflation? The prolonged decline of fertility and mortality rates induces a persistent downward pressure on the natural interest rate. If this development is not internalized by the monetary policy rule, inflation can be on a downward trend. Using the structure of a two-sector overlapping generations model embedded in a New-Keynesian framework with price frictions, calibrated for the euro area, this paper shows that following a commonly specified monetary policy rule the economy features a ”disinflationary bias” since 1990, in a way that can match the downward trend of core inflation found in the data for the euro area. In this model, continuing to follow the same rule makes inflation to be on a declining pattern at least until 2030. At the same time, changing consumption patterns towards nontradable items such as health-care generate a small ”inflationary bias” a positive deviation of inflation from target of less than 0.1 percentage points between 1990 and 2030. In the model setting of this paper, this inflationary bias is not strong enough to counteract the disinflationary bias generated by the downward impact of aging on the natural interest rate.
- JEL Code
- E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
- 27 December 2019
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2019Details
- Abstract
- Although recent wage growth has increasingly been in line with predictions, there has been a period of low and under-predicted wage growth in the euro area. This period of weak wage growth can be explained to a large extent by the drivers traditionally captured in a Phillips curve analysis, such as economic slack (including broader measures of labour market slack) and inflation expectations. However, these factors do not paint the full picture, as wages were consistently under-predicted during the period 2013-17. As wages differ across sectors and according to employees’ individual characteristics, significant changes in the composition of employment that have taken place in the euro area since the beginning of the crisis could have been an important factor in aggregate wage growth developments. These changes can result from slow-moving trends, cyclical changes or a combination of the two. This article discusses the role of such changes, known as “compositional effects”, in wage growth. It analyses the role of changes in the composition of employment with respect to the individual characteristics of employees (e.g. age, education or gender), employment types (e.g. permanent or temporary contracts) and sectoral shifts. The analysis is mainly based on microdata from the EU survey of income and living conditions, but the article also includes cross-checks and analyses based on the EU Labour Force Survey (EU-LFS) and national accounts data. The analyses indicate that compositional effects pushed up wage growth early in the crisis, but that the effect later decreased and turned negative. This has contributed to a relatively muted response from aggregate wage growth, both to the strong downturn of the labour market early in the crisis and later, from 2014 onwards, to cyclical improvements. Hence compositional effects have been one factor contributing to low wage growth in the euro area. The most important contributions to compositional effects seem to be related to changes in the age and educational structure of the workforce, which can have both a long-term and a cyclical impact. Looking at country-specific evidence, the euro area aggregate results have been influenced by Spain and Italy in particular.
- JEL Code
- J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 3 September 2019
- OCCASIONAL PAPER SERIES - No. 232Details
- Abstract
- Despite notable improvements in the labour market since 2013, wage growth in the euro area was subdued and substantially overpredicted in 2013-17. This paper summarises the findings of an ESCB expert group on the reasons for low wage growth and provides comparable analyses on wage developments in the euro area as a whole and in individual EU countries. The paper finds that cyclical drivers, as captured by a standard Phillips curve, seem to explain much of the weakness in wage growth during this period, but not all of it. Going beyond the drivers included in standard Phillips curves, other factors are also found to have played a role, such as compositional effects, the possible non-linear reaction of wage growth to cyclical improvements, and structural and institutional factors. In order to increase the robustness of wage forecasts, the paper also proposes ready-to-use tools for cross-checking euro area wage growth forecasts based on wage Phillips curves. These are derived based on a comprehensive real-time forecast evaluation exercise
- JEL Code
- J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 30 April 2019
- OCCASIONAL PAPER SERIES - No. 221Details
- Abstract
- The studies summarised in this paper focus on the economic implications of euro area firms’ participation in global value chains (GVCs). They show how, and to what extent, a large set of economic variables and inter-linkages have been affected by international production sharing. The core conclusion is that GVC participation has major implications for the euro area economy. Consequently, there is a case for making adjustments to standard macroeconomic analysis and forecasting for the euro area, taking due account of data availability and constraints.
- JEL Code
- F6 : International Economics→Economic Impacts of Globalization
F10 : International Economics→Trade→General
F14 : International Economics→Trade→Empirical Studies of Trade
F16 : International Economics→Trade→Trade and Labor Market Interactions
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
- 25 January 2017
- WORKING PAPER SERIES - No. 2006Details
- Abstract
- Most euro area countries have entered an unprecedented ageing process: life expectancy continues to rise and fertility rates have declined, while retirement age in the last twenty to thirty years hardly increased. This implies an ever smaller fraction of the working age population in total population, leading to changes in consumption and saving behaviours and having an important impact on the macroeconomy. In this paper we focus on the relationship between demographic change and inflation. We find that based on a cointegrated VAR model there is a positive long-run relationship between inflation and the growth rate of working-age population as a share in total population in the euro area countries as a whole, but also in the US and Germany. We also find that this relation is mitigated by the effect of monetary policy, which we account for by including the short-term interest rate in our analysis. One caveat of the analysis could be that the empirical relationship as found does not sufficiently take into account changes in policy settings following the high inflation experiences in the 1970s. Our findings support the view that demographic trends are among the forces that shape the economic environment in which monetary policy operates. This is particularly relevant for countries, like many in Europe, that face an ageing process.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes - Network
- Task force on low inflation (LIFT)
- 12 August 2014
- WORKING PAPER SERIES - No. 1712Details
- Abstract
- The sovereign debt crisis in the euro area has increased the interest in early warning indicators, with the aim to indicate the build?up of fiscal stress early on and to facilitate crisis prevention by a timely counteraction of fiscal and macroeconomic policies. This paper presents possible improvements to enhance existing early warning indicators for fiscal stress, especially for the euro area. We show that a country?specific approach could strongly increase the signalling power of early warning systems. Finally we draw policy conclusions for the setting?up and application of a system of early warning indicators for fiscal stress.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E65 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Studies of Particular Policy Episodes
E66 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General Outlook and Conditions
H62 : Public Economics→National Budget, Deficit, and Debt→Deficit, Surplus
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
F34 : International Economics→International Finance→International Lending and Debt Problems
- 15 February 2013
- WORKING PAPER SERIES - No. 1513Details
- Abstract
- We investigate the impact of fiscal stimuli at different levels of the government debt-to-GDP-ratio for a sample of 17 European countries from 1970 to 2010. This is implemented in an interacted panel VAR framework in which all coefficient parameters are allowed to change continuously with the debt-to-GDP ratio. We find that responses to government spending shocks exhibit strong non-linear behaviour. While the overall cumulative effect of a spending shock on real GDP is positive and significant at moderate debt-to-GDP ratios, this effect turns negative as the ratio increases. The total cumulative effect on the trade balance is negative at first but switches sign at higher levels of debt. Consequently, depending on the degree of public indebtedness, our results accommodate long-run fiscal multipliers which are greater and smaller than one or even negative as well as twin deficit and twin divergence behaviour within one sample and time period. From a policy perspective, these results lend additional support to increased prudence at high public debt ratios because the effectiveness of fiscal stimuli to boost economic activity or resolve external imbalances may not be guaranteed.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
- 15 September 2010
- WORKING PAPER SERIES - No. 1241Details
- Abstract
- The financial crisis of 2008/2009 has left European economies with a sizeable public debt stock bringing back the question what factors help to reduce these fiscal imbalances. Using data for the period 1985-2009 this paper identifies factors determining major public debt reductions. On average, the total debt reduction per country amounted to almost 37 percentage points of GDP. We estimate several specifications of a logistic probability model. Our findings suggest that, first, major debt reductions are mainly driven by decisive and lasting (rather than timid and short-lived) fiscal consolidation efforts focused on reducing government expenditure, in particular, cuts in social benefits and public wages. Second, robust real GDP growth also increases the likelihood of a major debt reduction because it helps countries to "grow their way out" of indebtedness. Third, high debt servicing costs play a disciplinary role strengthened by market forces and require governments to set up credible plans to stop and reverse the increasing debt ratios.
- JEL Code
- C35 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Discrete Regression and Qualitative Choice Models, Discrete Regressors, Proportions
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H6 : Public Economics→National Budget, Deficit, and Debt
- 14 April 2010
- OCCASIONAL PAPER SERIES - No. 109Details
- Abstract
- In mid-September 2008, a global financial crisis erupted which was followed by the most serious worldwide economic recession for decades. As in many other regions of the world, governments in the euro area stepped in with a wide range of emergency measures to stabilise the financial sector and to cushion the negative consequences for their economies. This paper examines how and to what extent these crisis-related interventions, as well as the fall-out from the recession, have had an impact on fiscal positions and endangered the longer-term sustainability of public finances in the euro area and its member countries. The paper also discusses the appropriate design of fiscal exit and consolidation strategies in the context of the Stability and Growth Pact to ensure a rapid return to sound and sustainable budget positions. Finally, it reviews some early lessons from the crisis for the future conduct of fiscal policies in the euro area.
- JEL Code
- E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
E2 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy - Network
- Eurosystem Monetary Transmission Network
- 17 December 2009
- WORKING PAPER SERIES - No. 1131Details
- Abstract
- This paper uses a dynamic panel approach to explain the determinants of widening sovereign bond yield spreads vis-à-vis Germany in selected euro area countries during the period end-July 2007 to end-March 2009, when the financial turmoil developed into a full-blown financial and economic crisis. Emphasis is given to the role of fiscal fundamentals and government announcements of substantial bank rescue packages. The paper finds that higher expected budget deficits and/or higher government debt ratios relative to Germany contributed to higher government bond yield spreads in the euro area during the analysed period. More importantly, the announcements of bank rescue packages have led to a re-assessment, from the part of investors, of sovereign credit risk, first and foremost through a transfer of risk from the private financial sector to the government.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
- 28 October 2009
- WORKING PAPER SERIES - No. 1101Details
- Abstract
- We investigate the impact of fiscal variables on bond yield spreads relative to US Treasury bonds in the Czech Republic, Hungary, Poland, Russia and Turkey from May 1998 to December 2007. To account for the importance of market expectations we use projected values for fiscal and macroeconomic variables generated from Consensus Economics Forecasts. Moreover, we compare results from panel regressions with those from country (seemingly unrelated regression) estimates, and conduct analogous regressions for a control group of Latin American countries. We find that the role of the individual explanatory variables, including the importance of fiscal variables, varies across countries.
- JEL Code
- C33 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Panel Data Models, Spatio-temporal Models
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H62 : Public Economics→National Budget, Deficit, and Debt→Deficit, Surplus
- 29 May 2009
- WORKING PAPER SERIES - No. 1055Details
- Abstract
- This paper explores implications of climate change for fiscal policy by assessing the impact of large scale extreme weather events on changes in public budgets. We apply alternative measures for large scale extreme weather events and conclude that the budgetary impact of such events ranges between 0.23% and 1.1% of GDP depending on the country group. Developing countries face a much larger effect on changes in budget balances following an extreme weather event than do advanced economies. Based on these findings, we discuss implications for fiscal policy and publiclyprovided disaster insurance. Our policy conclusions point to the enhanced need to reach and maintain sound fiscal positions given that climate change is expected to cause an increase in the frequency and severity of natural disasters.
- JEL Code
- Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
F59 : International Economics→International Relations, National Security, and International Political Economy→Other
H87 : Public Economics→Miscellaneous Issues→International Fiscal Issues, International Public Goods
- 13 March 2009
- WORKING PAPER SERIES - No. 1029Details
- Abstract
- This paper provides evidence on the role of net fiscal transfers to households and EU structural funds for per-capita output convergence across a large sample of European regions during the period 1995-2005. We find that net fiscal transfers, while achieving regional redistribution, seem to impede output growth and promote an "immiserising convergence": output growth rates in poor receiving regions decline by less than in rich paying regions. EU structural and cohesion funds spent during 1994-1999 had a positive, but slight, impact on future economic growth, mainly through the human development component.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
R11 : Urban, Rural, Regional, Real Estate, and Transportation Economics→General Regional Economics→Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
R23 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics
- 18 September 2008
- WORKING PAPER SERIES - No. 935Details
- Abstract
- This paper analyses the empirical relationship between fiscal policy and the current account of the balance of payments and considers how Ricardian equivalence changes this relationship. To do so, we estimate a dynamic panel threshold model for 22 industrialised countries in which the relationship between the current account and the government balance is allowed to alter according to the government debt to GDP ratio. The results show that for countries with debt to GDP ratios up to 90% the relationship between the government balance and the current account is positive, i.e. an increase in the fiscal deficit leads to a higher current account deficit. For very high debt countries this relationship however turns negative but insignificant, suggesting that a rise in the fiscal deficit does not result in a rise in the current account deficit. Implicitly this result suggests that households in very hight debt countries tend to become Ricardian. Estimating the same model for the 11 largest euro area countries shows that the reationship between the govnerment balance and the current account turns statistically insignificant when the debt to GDP ratio exceeds 80%.
- JEL Code
- F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
- 23 February 2008
- WORKING PAPER SERIES - No. 863Details
- Abstract
- This paper aims to address the issue of public pension reforms under demographic ageing that is likely to occur in Europe over the next 50 years. Three possible scenarios are analysed in a Blanchard OLG framework. These include: i) a decrease both in public pensions and the lump sum labour income tax, ii) a decrease both in public pensions and the distortionary corporate tax, iii) an increase in the retirement age. The analysis focuses on the effects of these fiscal policies on key economic variables such as consumption, private and public debt, output and wages. Quantitative experiments assess the impact of different fiscal policies in terms of public debt sustainability but most importantly suggest policies that smooth the transition of the economy to the new equilibrium. The main results suggest that the adverse effects of pension reforms on consumption are moderated when they are accompanied by appropriate taxation policies. In particular, when the tax response is rapid most of the adverse movement in consumption is avoided while public and national debt reach lower equilibrium levels.
- JEL Code
- E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
H3 : Public Economics→Fiscal Policies and Behavior of Economic Agents
J1 : Labor and Demographic Economics→Demographic Economics
H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
- 28 March 2007
- OCCASIONAL PAPER SERIES - No. 56Details
- Abstract
- This paper presents a survey of methods for assessing fiscal soundness, i.e. the capability of governments to honour their obligations in the short run and in the long run. The need for a comprehensive monitoring of fiscal soundness derives from the risks to economic stability that arise from the actual or expected difficulty a government may have in honouring its obligations. For the long run, methods derived from the government's intertemporal budget constraint make it possible to assess the size of a necessary adjustment to achieve sustainability of the debt burden. Uncertainty regarding shocks to the fiscal situation or the behaviour of financial market participants calls for the monitoring of financial flows and government obligations in the short run. Vigilance needs to be all the higher, the greater the uncertainty regarding long-term sustainability.
- 12 May 2006
- WORKING PAPER SERIES - No. 620Details
- Abstract
- This paper analyses the empirical relationship between fiscal policy and the trade account. Research prior to this paper did not consider that the components of private and public demand in the import demand equation exhibit different elasticities. Using pooled mean group estimation for annual panel data of the G7 countries for the years 1970 through 2002, we provide empirical evidence that the composition of overall demand - i.e. the distribution among public demand, private demand and export demand - has an impact on the magnitude of the trade account deficit.
- JEL Code
- F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F41 : International Economics→Macroeconomic Aspects of International Trade and Finance→Open Economy Macroeconomics
- 25 April 2005
- WORKING PAPER SERIES - No. 473Details
- Abstract
- We study fiscal consolidations in the Central and Eastern European countries and what determines the probability of their success. We define consolidation events as substantive improvements in fiscal balances adjusting for the impact of cyclical effects. We use Logit models for the period 1991-2003 to assess the determinants of the success of a fiscal adjustment. The results seem to suggest that for these countries expenditure based consolidations have tended to be more successful. By contrast, revenue based consolidations have a tendency to be less successful.
- JEL Code
- C25 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Discrete Regression and Qualitative Choice Models, Discrete Regressors, Proportions
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H62 : Public Economics→National Budget, Deficit, and Debt→Deficit, Surplus
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