nep-pub New Economics Papers
on Public Finance
Issue of 2022‒03‒21
three papers chosen by

  1. Post-COVID fiscal rules: a central bank perspective By Hauptmeier, Sebastian; Leiner-Killinger, Nadine; Muggenthaler, Philip; Haroutunian, Stephan
  2. Is There a VA Advantage? Evidence from Dually Eligible Veterans By David C. Chan Jr; David Card; Lowell Taylor
  3. Effects of fiscal consolidation on income inequality By Dante Cardoso; Laura Carvalho

  1. By: Hauptmeier, Sebastian; Leiner-Killinger, Nadine; Muggenthaler, Philip; Haroutunian, Stephan
    Abstract: Regarding a prospective reform of the European Stability and Growth Pact (SGP) it seems rather consensual that a simplified framework should take account of the prevailing macroeconomic context and enhance the balancing of sustainability and stabilisation considerations. This paper provides simulation analysis for the euro area and individual countries with a view to assessing the short- and longer-term budgetary and macroeconomic implications of a move to a two-tier system with an expenditure growth rule as single operational indicator linked to a debt anchor. Compared to the status quo, our analysis suggests that expenditure growth targets which take account of the ECB’s symmetric 2% inflation target can improve the cyclical properties of the framework. Fiscal policy would be tighter when inflation is above the target but looser when inflation is below target, resulting in a better synchronisation of fiscal and monetary policies. Providing additional fiscal accommodation in a low inflation environment would enable monetary policy to operate more effectively especially in the vicinity of the effective lower bound. The link to a longer-term debt anchor at the same time ensures a transition towards the Treaty’s debt reference level. JEL Classification: E63, H50, H60
    Keywords: debt sustainability, European fiscal rules, monetary and fiscal policy interactions
    Date: 2022–03
  2. By: David C. Chan Jr; David Card; Lowell Taylor
    Abstract: We study public vs. private provision of health care for veterans aged 65 and older who may receive care provided by the US Department of Veterans Affairs (VA) and in private hospitals financed by Medicare. Utilizing the ambulance design of Doyle et al. (2015), we find that the VA reduces 28-day mortality by 46% (4.5 percentage points) and that these survival gains are persistent. The VA also reduces 28-day spending by 21% and delivers strikingly different reported services relative to private hospitals. We find suggestive evidence of complementarities between continuity of care, health IT, and integrated care.
    JEL: H4 H51 I10 I18
    Date: 2022–02
  3. By: Dante Cardoso (University of Sao Paulo); Laura Carvalho (University of Sao Paulo)
    Abstract: Based on a narrative dataset constructed by David and Leigh (2018) that covers nine South American economies in the period 1982-2017, this paper estimates dynamic effects of fiscal consolidations on income inequality from Jordá (2005)'s local projections method. Results suggest that fiscal consolidations lead to a rise in income inequality in all specifications and data panels. When decomposing fiscal shocks, spending-based fiscal consolidations appear to significantly increase the Gini index, while tax-based fiscal consolidations do not show statistically significant effects on income inequality. The rise in the Gini index for disposable income caused by a spending-based fiscal adjustment of 1% of GDP varies between 1.74 and 3.22% in five years depending on the selected data panel (country-years). The magnitude of this effect is higher than in most of the previous studies carried out for OECD countries.
    Keywords: income inequality; fiscal consolidation; fiscal austerity; South America; local projections
    JEL: D30 D63 E60 E62
    Date: 2021

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