CEF.UP – WiP Seminar/Webinar

Friday – June 7^th, 2024 at 13:00h (1 pm) | Room 305 | Online

Fiscal Policy Dispersion in the Euro Area – a new quantitative index

Daniel Loureiro – FEP – School of Economics and Management – University of Porto and Cef.Up

Abstract:

“We developed a new Fiscal Dispersion Index to assess fiscal policy coordination in the Euro Area and complement the existent literature. We found greater fiscal policy dispersion around the years of economic crisis, signaling a deterioration of coordination. Besides, we highlighted Portugal as one the most problematic countries, continuously deviating from the average policies. However, the direction of the Portuguese deviation is not constant over time. It shifted from looser policies between 2000 and 2007 to tighter policies from 2016 to 2021. Moreover, we also found that Germany and Netherlands pursued tighter policies than the average, particularly when facing common shocks. Thus, we recommend that additional measures should be approved to improve coordination during the more challenging times, preventing insufficient expansionary policies. Failing to do so will likely hamper the credibility of the European framework and institutions.”