Do Sound Public Finances Require Fiscal Rules or Is Market Pressure Enough?

Michael Bergman, Michael M. Hutchison, Svend E. Hougaard Jensen

Publikation: Working paperForskning

Resumé

This paper discusses the balance between market pressure and fiscal rules in order to keep public finances on a sustainable path. We provide empirical evidence on market assessments of sovereign default risk to economic news, announcements of national austerity programs, EU programs designed to support government finances, and banking fragility emanating from several countries in the euro area affected by the European sovereign debt crisis. We find that, in general, the quality of market signals is an insufficient indicator alone to accurately guide the conduct of fiscal policy, particularly during the crisis period. Therefore, market signals should be used to complement fiscal rules rather than serving as a substitute.
OriginalsprogEngelsk
Udgivelses stedBruxelles
UdgiverEuropean Commission
Sider58
ISBN (Trykt)9789279285714
DOI
StatusUdgivet - apr. 2013
NavnEconomic Papers / European Economy
Nummer489
ISSN1725-3187

Emneord

  • Euro area
  • Sovereign debt
  • Fiscal rules
  • Financial markets
  • Transmission of news

Citer dette

Bergman, M., Hutchison, M. M., & Hougaard Jensen, S. E. (2013). Do Sound Public Finances Require Fiscal Rules or Is Market Pressure Enough? (s. 58). Bruxelles: European Commission. Economic Papers / European Economy, Nr. 489 https://doi.org/10.2765/42955
Bergman, Michael ; Hutchison, Michael M. ; Hougaard Jensen, Svend E. / Do Sound Public Finances Require Fiscal Rules or Is Market Pressure Enough?. Bruxelles : European Commission, 2013. s. 58 (Economic Papers / European Economy; Nr. 489).
@techreport{0a684eaec44e47c5b6bbed806ae3ebf4,
title = "Do Sound Public Finances Require Fiscal Rules or Is Market Pressure Enough?",
abstract = "This paper discusses the balance between market pressure and fiscal rules in order to keep public finances on a sustainable path. We provide empirical evidence on market assessments of sovereign default risk to economic news, announcements of national austerity programs, EU programs designed to support government finances, and banking fragility emanating from several countries in the euro area affected by the European sovereign debt crisis. We find that, in general, the quality of market signals is an insufficient indicator alone to accurately guide the conduct of fiscal policy, particularly during the crisis period. Therefore, market signals should be used to complement fiscal rules rather than serving as a substitute.",
keywords = "Euro area, Sovereign debt, Fiscal rules, Financial markets, Transmission of news, Euro Area, Sovereign Debt, Fiscal Rules, Financial Markets, Transmission of News",
author = "Michael Bergman and Hutchison, {Michael M.} and {Hougaard Jensen}, {Svend E.}",
year = "2013",
month = "4",
doi = "10.2765/42955",
language = "English",
isbn = "9789279285714",
pages = "58",
publisher = "European Commission",
address = "Belgium",
type = "WorkingPaper",
institution = "European Commission",

}

Do Sound Public Finances Require Fiscal Rules or Is Market Pressure Enough? / Bergman, Michael; Hutchison, Michael M. ; Hougaard Jensen, Svend E.

Bruxelles : European Commission, 2013. s. 58.

Publikation: Working paperForskning

TY - UNPB

T1 - Do Sound Public Finances Require Fiscal Rules or Is Market Pressure Enough?

AU - Bergman, Michael

AU - Hutchison, Michael M.

AU - Hougaard Jensen, Svend E.

PY - 2013/4

Y1 - 2013/4

N2 - This paper discusses the balance between market pressure and fiscal rules in order to keep public finances on a sustainable path. We provide empirical evidence on market assessments of sovereign default risk to economic news, announcements of national austerity programs, EU programs designed to support government finances, and banking fragility emanating from several countries in the euro area affected by the European sovereign debt crisis. We find that, in general, the quality of market signals is an insufficient indicator alone to accurately guide the conduct of fiscal policy, particularly during the crisis period. Therefore, market signals should be used to complement fiscal rules rather than serving as a substitute.

AB - This paper discusses the balance between market pressure and fiscal rules in order to keep public finances on a sustainable path. We provide empirical evidence on market assessments of sovereign default risk to economic news, announcements of national austerity programs, EU programs designed to support government finances, and banking fragility emanating from several countries in the euro area affected by the European sovereign debt crisis. We find that, in general, the quality of market signals is an insufficient indicator alone to accurately guide the conduct of fiscal policy, particularly during the crisis period. Therefore, market signals should be used to complement fiscal rules rather than serving as a substitute.

KW - Euro area

KW - Sovereign debt

KW - Fiscal rules

KW - Financial markets

KW - Transmission of news

KW - Euro Area

KW - Sovereign Debt

KW - Fiscal Rules

KW - Financial Markets

KW - Transmission of News

U2 - 10.2765/42955

DO - 10.2765/42955

M3 - Working paper

SN - 9789279285714

SP - 58

BT - Do Sound Public Finances Require Fiscal Rules or Is Market Pressure Enough?

PB - European Commission

CY - Bruxelles

ER -