EconPol Europe – European Network for Economic and Fiscal Policy Research

EconPol Europe — European Network for Economic and Fiscal Policy Research

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July 14, 2021 | Working Paper

The EMU Experience of Portugal: Current Account Targeting Hypothesis versus Twin Deficit Hypothesis

This Working Papaer analyses the relation between Portugal’s government budget balance and current account balance from 1999 – when Portugal joined the Euro – until 2019. ...Details

July 12, 2021 | Working Paper

European Structural Funds and Resilient and Recovery Facility Governance

The implementation of recovery funds under the EU’s Covid-19 recovery program NextGenerationEU should be aligned with business cycle phases. This could ensure that financial support will have the most even and efficient impact across regions. ...Details

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July 03, 2021 | Policy Brief

Who Will Pay Amount A?

The latest OECD tax reform will affect only 78 of the world’s 500 largest companies and only about 37 European companies, this EconPol Policy Brief reveals. ...Details

Latest Publication

Current Account Targeting Hypothesis versus Twin Deficit Hypothesis: The EMU Experience of Portugal

António Afonso and José Carlos Coelho (EconPol Europe, ISEG - Lisbon School of Economics & Management, Universidade de Lisboa; REM/UECE)

This Working Papaer analyses the relation between Portugal’s government budget balance and current account balance from 1999 (Q1) – when Portugal joined the Euro – until 2019 (Q4). The study arrives at three main conclusions: First, a tightening of fiscal policy improves the external balance of the Portuguese economy, although not substantially. Second, the share of public consumption on GDP has a negative impact on the current account balance. This means, that any policy that stimulates economic activity leading to an increase in public consumption needs to be applied carefully. Finally, the research shows that the investment rate negatively affects the cyclical component of the current account balance, suggesting a high degree of integration of the Portuguese economy in international financial markets. Even though public policy measures promoting investment have a negative impact on external accounts in the short-term, they contribute to the structural improvement of the government balance in the long-run.

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Upcoming events

EconPol Annual Conference 2021

The State of Fiscal Resilience – How Prepared is Europe for Future Crises?

Online Event

13 - 14 October

The European Union’s recovery plan has been adopted in response to the coronavirus crisis. It is a game changer in terms of European economic policy integration: NextGenerationEU is larger than any other stimulus package passed by the EU in previous crises. Together with the EU’s long-term budget a total of EUR 1.8 trillion will be spent to boost and modernize Europe’s economy with major priorities set in the areas of digitalization and climate change. The recovery package will also be financed by commonly issued debt. Finding the right balance between expansionary fiscal policy and budgetary discipline will be a key challenge in the upcoming years.

While the European recovery fund sets new precedents, it is only a temporary instrument. What lessons can the EU take away? Is Europe’s fiscal framework prepared for other future crises? This question will be at the heart of our EconPol Europe Annual Conference 2021 which – for the fifth time – will bring together our expert network members from across Europe with politicians, policymakers, and researchers. Due to the uncertain development of the Covid-19 pandemic the conference will be conducted online. Clemens Fuest, President of ifo Institute, will open and close the conference.

Our topic in the panel discussion on day one is “Fiscal Policy for the Post-Covid Era – US vs. EU". Our panelists will shed light on different policy answers to the coronavirus crisis. While the EU’s fiscal policy response is unprecedented, the US has been implementing a much larger fiscal stimulus package. Should the EU have stepped up its fiscal response? Or does the US’s expansive relief package bear higher risks, such as hyperinflation? Another key question concerns whether the money allocated to EU member states will be spent efficiently to finance growth-enhancing reforms. Panelists confirmed so far are Olivier Blanchard (MIT) and Maarten Verwey (European Commission). Details on further speakers will follow. The discussion will be moderated by Maithreyi Seetharaman (Facultas Media).

Day two of our conference will have an academic focus. We will host several conference sessions where researchers from the EconPol Europe network will present their latest research and discuss it with experts from national and European institutions and the private sector. We will share further details on these panels in due course.

Watch this space for the latest news on our conference.

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