Directorate-General for Economic and Financial Affairs

About: Directorate-General for Economic and Financial Affairs is a government organization based out in Brussels, Belgium. It is known for research contribution in the topics: Fiscal policy & European union. The organization has 80 authors who have published 145 publications receiving 4262 citations. The organization is also known as: ECFIN & GD ECFIN.

Monetary and Fiscal Policy Interactions under a Stability Pact

Abstract: The paper analyses in a simple setting a game between an inflation-conservative central bank and a fiscal authority subject to an upper limit on the budget deficit. It is shown that complementarity or substitutability between the policies and the preference of each authority for the other authority's behaviour crucially depends on the type of shock hitting the economy. If the government attempts to stimulate output beyond its natural level, a "deficit bias" emerges under non-cooperation; under cooperation, the equilibrium is characterised by both a "deficit bias" and an "inflation bias". However, if the government only pursues cyclical stabilisation these biases disappear and there are positive gains from coordinating the policy responses to shocks.

A decade of labour market reforms in the EU: insights from the LABREF database

Abstract: This paper analyses the main features and determinants of labour market reforms in the EU over the period of 2000–2011 using the European Commission LABREF database. The data suggests that the timing, focus, and geographical distribution of reforms reflect the interplay between economic shocks and existing institutions. The 2008 crisis was followed by increased policy activity in most policy domains in a large number of EU countries, initially to cushion the impact of the crisis on employment and incomes, subsequently to improve the adjustment capacity of labour markets. Regression analysis indicates that reform activism is stronger in countries with lower GDP per capita and long-standing EU membership, under critical economic and labour market conditions, and where political costs are low. The direction of reforms is affected by economic and labour market conditions, available fiscal space, and by initial policy settings.

Information Technology and Returns to Scale

Abstract: Disciplined by detailed firm-level data from France, we study the response of the macroeconomy to the dramatic fall observed in IT prices from 1990 to 2007. Our model of industry dynamics with heterogeneous firms accounts for the novel fact that demand for hardware and software, when compared to other inputs, is more elastic in firm size. We show that this nonhomotheticity has important consequences for firm-level returns to scale and for the aggregate response. In our calibration, falling IT prices quantitatively explain around half of the changes in concentration and in the composition of aggregate labor share in France.

Wage Premia and Skill Upgrading in Italy: Why didn't the Hound Bark?

Abstract: This paper presents firm level evidence on the dynamics of nonmanual wage premia and employment shares in Italian manufacturing during the nineties. We find that the relative stability of aggregate wage premia and employment shares hides offsetting disaggregate forces. First, while technical progress raises the relative demand for skilled labor within firms, demand changes associated with exports reduce the relative demand for skills. Second, within the class of nonmanual workers, wage premia and employment shares of executives rise substantially, whereas those of clerks fall in a similar proportion. We also find that the export status of firms plays a key role in explaining labour market dynamics, as exporters account for most of both demand-related and technology-related shifts. Overall, our results for Italy question the general validity of the conventional view that emphasizes the role of labor market institutions, as opposed to trade and technology, in determining wage and employment dynamics in continental Europe.

Constricted, lame and pro-cyclical? Fiscal policy in the euro area revisited

Abstract: It is often argued that fiscal stabilisation in the euro area compares unfavourably with the US, not least because of the perceived limitations of the Stability and Growth Pact This paper qualifies this perception by taking a closer look at fiscal policy making since the mid-1990s It examines a number of elements which are generally overlooked or not considered in the analysis of fiscal stabilisation In particular, on top of discretionary fiscal policy, which generally is at the core of existing studies, it also takes into account the size of automatic stabilisers Moreover, it considers the difference between policy intentions, as formulated or perceived in real time, and actual outturns, and possible reasons for the gap between the two On the basis of such a more specific analysis, fiscal stabilisation in the euro area appears less dire than commonly assumed It also suggests a number of points on how to improve the track record, including by strengthening fiscal governance