Economic & Fiscal Policy

During the recent crises, governments around the world have spent large amounts of public funds to limit the impact of economic downturns on citizens and corporations. The resulting pressure on public funds is highlighting the crucial need to improve tax compliance.

The financial sector may play a central role in climate change. This is because, ideally, climate policy measures create important incentives for investors throughout the globalized world to redirect their capital in favor of a cleaner production and thus lower emissions. That is why climate policy must consider the link between the real sector and the financial sector. This transition will not happen by itself. It requires targeted financing measures. To make it effective, policymakers need information about what economic activity, and thus what investment, can be considered green or sustainable. The task is to identify and compile relevant data and provide it to investors in a suitable classification, e.g., via an ESG rating or a taxonomy. Our authors in the “Policy Debate of the Hour” discuss to which extent green finance can make the economy greener. They also examine the role the financial sector can play in this transition. Among other things, they shed light on how “green” can be measured and look at the role of climate policy and incentive effects. They also provide recommendations for both economic and climate policy. In our “Economic Policy and its Impact” section, the authors shed light on the question of how teaching evolutionary theory changes students' knowledge and important choices in their life. In “Institutions Across the World” we discuss how policymakers can create incentives for households to follow tax rules when they use household-related services. The section “Big Data-Based Economic Insights” uses a textual analysis to look at remarks made in ECB press conferences.

Persistently low interest rates on government debt over past decades have prompted some economists to question the wisdom of fiscal policies that restrict the use of deficits to finance government spending. In the new EconPol Policy Brief Bev Dahlby and Ergete Ferede argue that the widely held view that there is no, or only a low, fiscal cost from debt-financed increases in program spending can be misleading.

The following article provides an overview of four projects that assess the effects of regulation and taxation as well as the pandemic’s impact on the German real estate market, using large-scale property price as well as survey data. The projects aim to provide answers to the following questions: Do subsidies make housing purchases more affordable? How do real estate transfer taxes affect house prices? How does rent regulation such as the Berlin rent cap affect the real estate market? And, which future trends in the housing market can be expected given the pandemic’s potentially long-lasting impacts on residential preferences?