Overview publications

The Role of Fiscal Policies for External Imbalances: Evidence from the European Union

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

This research from António Afonso and José Carlos Coelho studies the existence of a causal relationship between the general government balance and the current account balance (assessed as a percentage of GDP) for 28 European Union countries, using annual data for 1996 to 2019. They find that an increase in budget deficit of 1 pp of GDP results in a deterioration of the current account deficit of 0.318 pp of GDP, which supports the Twin Deficits Hypothesis.

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Cover of EconPol opinion

Vaccines: How to Use Market-Based Incentives to Ramp Up Production

Clemens Fuest and Daniel Gros

Economic incentives to accelerate vaccine production would be much more productive than the empty threat of suing AstraZeneca. The additional cost for boosting vaccine supply for Europe might run into a couple of billions of euros, but this would be a lot less than the cost of prolonged disruption to the economy and society, let alone the lives lost. Clemens Fuest and Daniel Gros examine the EU's mistakes. 

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The Global Economic Impact of Politicians: Evidence from an International Survey RCT

Dorine Boumans (EconPol Europe, ifo Institute), Klaus Gründler (EconPol Europe, ifo Insitute, University of Munich [LMU], CESifo), Niklas Potrafke (EconPol Europe, ifo Insitute, University of Munich [LMU], CESifo), Fabian Ruthardt (EconPol Europe, ifo Insitute, University of Munich [LMU])

A large-scale RCT survey of 843 experts in 107 countries examined how the US president influences economic expectations of international experts, including GDP growth, unemployment, inflation and trade in their country. The results show that the election of Joe Biden increased growth expectations of international experts by 0.98 percentage points for the year 2021, that treatment effects materialize only in the short-run and experts’ uncertainty increased after the election. The results suggest that exceptional politicians influence global economic outcomes.

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(Non-)Keynesian Effects of Fiscal Austerity: New Evidence from a Large Sample

António Afonso, José Alves, João Tovar Jalles

Using a large sample of 174 countries between 1970 and 2018, authors empirically assess whether a usually expected negative response of private consumption and private investment to a fiscal consolidation is reversed. They find that increases in government consumption have a Keynesian effect on real per capita private consumption; there is a positive effect of tax increases on private consumption when there is a fiscal consolidation; there is a crowding-in effect for private investment, from fiscal contractions; expansionary fiscal consolidations occur particularly in highly indebted advanced economies following an increase in taxes. The negative effect of taxation on private consumption is larger when an economy is experiencing a financial crisis, but it is not consolidating.

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International Transmission of Interest Rates: The Role of International Reserves and Sovereign Debt

António Afonso (EconPol Europe, ISEG – School of Economics and Management, Universidade de Lisboa; REM – Research in Economics and Mathematics, UECE), Florence Huart (University of Lille, LEM), João Tovar Jalles (EconPol Europe, ISEG – School of Economics and Management, Universidade de Lisboa; REM – Research in Economics and Mathematics, UECE), Piotr Stanek (Cracow University of Economics)

In this study of the determinants of international transmission of interest rates with a special emphasis on the role of international reserves and government debt, authors confirm that the trilemma still holds. They find significant spillovers from the U.S. interest rates to other countries, mostly for Advanced Economies; a dampening effect of the share of external liabilities in the domestic currency; a negative effect of international reserves on interest rates; higher reserves decrease risk premia for long-term interest rates; the significance of spillovers fades once the sovereign debt reaches 100% of GDP in developed countries.

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Cover of EconPol opinion

The Advantages of the Division of Labour Also Apply to Economic Policy: The Green New Deal

Clemens Fuest (ifo Institute)

Even in times of the corona pandemic, environmental and climate protection are among the dominant topics in the economic policy debate. This is justified. Global warming is one of the greatest challenges of our time. Tackling it requires a transformation of the economy. CO2 emissions must to be reduced, and we need to adapt to the climate change that has already occurred or will occur despite all efforts. European policymakers have set out to drive this transformation under the banner of the Green New Deal. The objectives of the Green New Deal are shared by a large majority of the population. But it is controversial how and with which instruments these goals should be pursued.

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The Deserving and the Undeserving: “Heuristics” or “Automatism”?

Peter Grand, Guido Tiemann (EconPol Europe, IHS Vienna)

Voter attitudes towards the welfare state, its specific programs, or specific people who are supposed to “benefit” from the implied social transfers have always been of vital interest for discussions in the public and political spheres. In this working paper, Peter Grand and Guido Tiemann (EconPol Europe, IHS Vienna) examine public sentiments concerning the conditionality of unemployment benefits and find that opinion is influenced by the supposed level of 'deservedness', along with economic, social, and institutional context.


 

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Covid-19 Pandemic: Challenges and a Way Forward

Panu Poutvaara, Madhinee Valeyatheepillay (EconPol Europe, ifo Institute, LMU Munich)

Sacrificing lives does not save the economy, according to this latest policy report from Panu Poutvaara and Madhinee Valeyatheepillay: countries that fail to suppress the pandemic risk a disastrous overburdening of their health care system and patients who could have been otherwise saved die. Short of an effective vaccine, no single measure is enough to stop the pandemic. Instead, societies need a combination of effective social distancing measures, careful hygiene, use of masks in indoor public spaces and contact tracing.

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Offshore Tax Evasion and Wealth Inequality: Evidence from a Tax Amnesty in the Netherlands

Wouter Leenders (University of California), Arjan Lejour, Simon Rabaté, Maarten van’t Riet (EconPol Europe; CPB Netherlands Bureau for Economic Policy Analysis)

While tax administrations have made considerable progress in fighting tax evasion, it remains a seemingly inextricable part of our world. Exploiting unique datasets covering over 28,000 tax evaders in the Netherlands, Wouter Leenders, Arjan Lejour, Simon Rabaté and Maarten van’t Riet investigate the distribution of tax evasion and its implications for the measurement of wealth inequality. They show that the distributional pattern of tax evasion depends on the type of tax evasion, e.g. it depends on the offshore country of choice. They explore a number of explanations to account for the differences in results and caution against projecting distributional patterns of detected tax evasion onto still undetected evasion. 
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Structural Tax Reforms and Public Spending Efficiency

António Afonso (EconPol Europe; ISEG; REM/UECE), João Tovar Jalles (EconPol Europe; ISEG; REM/UECE; Economics for Policy and Centre for Globalization and Governance; IPAG Business School), Ana Venâncio (ISEG; ADVANCE/CSG)

This working paper, from António Afonso, João Tovar Jalles and Ana Venâncio, evaluates the effects of structural tax reforms on government spending efficiency in a sample of OECD economies over the period 2007-2016. Increases in tax rates result in falling public efficiency, with the negative effect found to be more significant for increases in personal income tax and value added tax. In times of economic expansion, increasing the corporate income tax base and reducing personal income tax rates were found to have a positive impact on public sector efficiency. In recessions, efficiency improves when the personal income tax and value added tax bases increase and the corporate income tax rate increases. 

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