Juan Pablo Cuesta, Swarnali Ahmed Hannan, 12 August 2021

Covid-19 has had a staggering adverse impact on lives and livelihoods, disproportionately affecting the poor and the vulnerable. To shed light on possible scarring effects, this column studies the effect of five past pandemics on output, unemployment, poverty, and inequality in the near and medium term. The findings reveal significant negative effects, although countries that provided relatively large fiscal support experienced limited output declines. Historically, increases in unemployment, poverty, and inequality were lower for countries with greater fiscal support and relatively stronger initial conditions, which included higher formality, family benefits, and health spending. 

Gianmarco Daniele, Tommaso Giommoni, 10 May 2021

Austerity measures have been widely adopted around the world with mixed results in terms of public debt reduction and adverse political effects. This column examines the effect of fiscal austerity policies on corruption in Italian municipalities. The budget rules have led to a decrease in both recorded corruption rates and corruption charges per euro spent, without a clear effect on local public service provision. The drop in corruption emerges mostly in pre-electoral years for mayors eligible for reelection. Budget constraints might induce local governments to curb expenditures while dampening exposure to corruption.

Roel Beetsma, Ludger Schuknecht, 25 March 2021

Vincent Aussilloux, Adam Baïz, Matthieu Garrigue, Philippe Martin, Dimitris Mavridis, 19 February 2021

The Covid-19 crisis has presented policymakers across the euro area with an unprecedented challenge, not least of all because the shock has come to both the supply side and the demand side of the economy. This column presents a preliminary analysis of different nations’ responses so far, focusing on which measures have been deployed to address each side of the economic shock and where a ‘mixed approach’ has been taken to work in tandem. At a time where coordinated action may be needed, there is a concerning level of inconsistency in strategy. 

Niccolò Battistini, Giovanni Callegari, 11 March 2020

With monetary policy constrained by the effective lower bound, the debt sustainability implications of a fiscal expansion are a pressing concern. This column shows that in a general equilibrium model of fiscal limits, the adverse impact of a fiscal expansion on sustainability is muted at the effective lower bound compared with normal times. Getting the timing of public spending increases right, however, is essential for containing sustainability risks.

Joakim Ruist, 28 January 2016

The current inflow of refugees into Europe has left policymakers in disagreement over how to react. A major concern is the perceived financial burden that can result from large intakes. This column discusses the fiscal impact of refugees on the Swedish economy. The current net redistribution from the non-refugee population to refugees (excluding arrivals in 2015) is estimated to be 1.35% of GDP. The economic burden of a generous refugee policy is therefore not particularly heavy, especially if the host country incorporates them as quickly as possible into the labour market.

Andrew Berg, Andrea Presbitero, Luis-Felipe Zanna, 05 January 2016

Recent policy recommendations suggest that the output growth ‘bang’ for each additional ‘buck’ of public investment depends on the efficiency of public investment spending. This column argues that high-efficiency and low-efficiency countries may have similar growth impacts from additional public investment spending. This is because efficiency and scarcity of public capital are likely to be inversely related across countries. Efficiency and the rate of return need to be considered together in assessing the impact of increases in investment.

Reinhilde Veugelers, 28 August 2014

The Crisis affected public spending. Research and innovation is one area often highlighted as needing protection. This column does not find strong evidence that European countries sacrificed research and innovation more than other government expenditure. However, there is strong heterogeneity across countries. Innovation lagging and fiscally weak countries cut R&I spending while innovation-leading forged it ahead. Research of this divide and long-term growth is still limited.

Dan Silverman, Nicola Persico, 06 November 2007

Electoral reforms that strengthen parties and lengthen the life of governments are likely to be good for some aspects of public policy, but they may strengthen the impact of party factions on spending and thereby foster excessive redistribution. Reforms aimed at governability are just one step along the path toward better governance.

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