One uncontroversial conclusion from four years of European debt crisis is the need for a general overhaul of fiscal governance. However, any reforms must be based on a sound understanding of the (fiscal) origins of the current crisis and the impact of various fiscal institutions. This project addresses several key issues in this regard. The first module is devoted to the study of the impact of windfall revenues (related to macro-development and asset booms) and the moral hazard effects of fiscal transfers on budgetary decisions. The second module analyses the growth effects of consolidation, and the third module studies the political effects of consolidation, thereby contributing to the analysis of democratic constraints of consolidation policies. The fourth module, finally, studies the effectiveness of fiscal rules, in particular the political-economic conditions under which fiscal rules effectively constrain budgetary policy. Overall, these modules contribute to the understanding of how to improve the design of fiscal governance institutions in the EU. An overarching methodological objective is to advance the implementation of credible identification techniques.
01.04.2014 - 30.09.2015
Land Baden-Württemberg, Stuttgart, DE