4. 4 of 14
measure economic linkages
1. spatial models
measure integration of sovereign
bond markets
2. SVAR model
measure spillover of debt on
long-term interest rates
3. FA-G-VAR model
measure contagion on
sovereign bond markets
5. 5 of 14
fiscal federalism
1. secession
rich break-away regions extract
rents from center
political economy model
federalism with sidepayments
2. common action
pursue political construction
sidepayments for common gain
3. center – region, and a bank
political economy models with
N regions, 1 central government
+ 1 central bank
7. 7 of 14
fight on budget between interest
groups
spend what you can
causes procyclical behaviour
work in progress:
1) new IV test on fiscal rule
2) political economy model in DSGE
8. 8 of 14
shift in policy
set tax, spend in response to
economic and political conditions
policy changes are induced
work in progress:
test endogenous response of
policy with IV Markov switching
model
9. 9
test expectations of market participants
panel of Consensus Forecasters
markets evaluate budget figures in different ways
of 14
10. 10 of 14
forecasting budget performance
Consensus Forecasters
combination improves performance by 20%
11. 11 of 14
new European governance system
evaluate forecasting performance
too rosy picture by governments
