Andresa Lagerborg's Books

Reforming the EU Fiscal Framework

Strengthening the Fiscal Rules and Institutions

By: Mr. Nathaniel G Arnold,Mr. Ravi Balakrishnan,Ms. Bergljot B Barkbu,Mr. Hamid R Davoodi,Andresa Lagerborg,Mr. Waikei R Lam,Mr. Paulo A Medas,Ms. Julia Otten,Louise Rabier,Christiane Roehler,Asghar Shahmoradi,Mariano Spector,Mr. Sebastian Weber,Mr. Jeromin Zettelmeyer

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Reforming the EU Fiscal Framework

Strengthening the Fiscal Rules and Institutions

The EU’s fiscal framework needs reform. While existing fiscal rules have had some impact in constraining deficits, they did not prevent deficits and debt ratios that have threatened the stability of the monetary union in the past and that continue to create vulnerabilities today. The framework also has a poor track record at managing trade-offs between containing fiscal risks and stabilizing output. Finally, the framework does not provide sufficient tools for EU-wide stabilization. This was most visible during the decade following the euro area sovereign debt crisis, when structurally low real interest rates stretched the policy tools of the European Central Bank (ECB), leading to a persistent undershooting of its inflation target. This paper proposes a new framework based on risk-based EU-level fiscal rules, strengthened national institutions, and a central fiscal capacity. First, risk-based EU-level fiscal rules would link the speed and ambition of fiscal consolidation to the level and horizon of fiscal risks, as identified by debt sustainability analysis (DSA) using a common methodology developed by a new and independent European Fiscal Council (EFC). The 3 percent deficit and 60 percent debt reference values would remain. Second, all member countries would be required to enact medium-term fiscal frameworks consistent with the EU-level rules—that is, to ensure convergence over the medium-term to an overall fiscal balance anchor by setting expenditure ceilings. Independent national fiscal councils (NFCs) would have a much stronger role to strengthen checks and balances at the national level (including undertaking or endorsing macroeconomic projections and performing DSAs to assess fiscal risks). The European Commission (EC) would continue to play its key surveil¬lance role as articulated in the Maastricht Treaty and the EFC would be the center of a peer network of fiscal councils. Third, building on the recent experience with the NextGenerationEU (NGEU), an EU fiscal capacity (FCEU) would improve euro area macroeconomic stabilization and allow the provision of common EU public goods—a task that has become more urgent given the green transition and common security concerns. Central to the proposal is a mutually reinforcing relationship between EU rules and national-level imple¬mentation. Strengthening implementation requires both better national ownership of the rules and their application and greater congruence of national-level frameworks with EU-level rules. The former can only be achieved by rules that convincingly balance the needs of members with the avoidance of negative externali¬ties across members. This argues for a risk-based approach—the first pillar of our proposal. The latter requires a stronger role for significantly upgraded national level frameworks—the second pillar of our proposal.

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International Monetary Fund

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ISBN 13

9798400209888

Fiscal Rules and Fiscal Councils: Recent Trends and Performance During the COVID-19 Pandemic

By: Mr. Hamid R Davoodi,Paul Elger,Alexandra Fotiou,Mr. Daniel Garcia-Macia,Xuehui Han,Andresa Lagerborg,W. Raphael Lam,Mr. Paulo A Medas

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Fiscal Rules and Fiscal Councils: Recent Trends and Performance During the COVID-19 Pandemic

By: Mr. Hamid R Davoodi,Paul Elger,Alexandra Fotiou,Mr. Daniel Garcia-Macia,Xuehui Han,Andresa Lagerborg,W. Raphael Lam,Mr. Paulo A Medas

Adoption of fiscal rules and fiscal councils continued to increase globally over the last decades based on two new global datasets. During the pandemic, fiscal frameworks were put to test. The widespread use of escape clauses was one of the novelties in this crisis, which helped provide policy room to respond to the health crisis. But the unprecedented fiscal actions have led to large and widespread deviations from deficit and debt limits. The evidence shows that fiscal rules, in general, have been flexible during crises but have not prevented a large and persistent buildup of debt over time. Experience shows that deviations from debt limits are very difficult to reverse. The paper also presents evidence on the benefits of a good track record in abiding by the rules. All these highlight the difficult policy choices ahead and need to further improve rules-based fiscal frameworks.

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International Monetary Fund

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ISBN 13

9798400200472

The Return to Fiscal Rules

By: Francesca Caselli,Mr. Hamid R Davoodi,Carlos Goncalves,Mr. Gee Hee Hong,Andresa Lagerborg,Mr. Paulo A Medas,Anh D. M. Nguyen,Jiae Yoo

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The Return to Fiscal Rules

By: Francesca Caselli,Mr. Hamid R Davoodi,Carlos Goncalves,Mr. Gee Hee Hong,Andresa Lagerborg,Mr. Paulo A Medas,Anh D. M. Nguyen,Jiae Yoo

Governments face difficult policy trade-offs with record debt levels, tightening monetary policies, and urgent demands, including food and energy crises, the climate agenda, and population aging. Governments need to communicate fiscal plans to reduce debt sustainability risks and promote consistent macroeconomic policies. Many envisage a return to fiscal rules that had been suspended during the pandemic to strengthen credibility. This situation offers an opportunity to rethink fiscal rules and determine how governments can make fiscal policy more agile, including in responding to crises, without undermining fiscal sustainability. A risk-based medium-term fiscal framework that combines standards, rules, and strengthened institutions would strike a better balance between flexibility and credibility.

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ISBN 13

9798400219467

Smart Containment: Lessons from Countries with Past Experience

By: Alexandra Fotiou,Andresa Lagerborg

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Smart Containment: Lessons from Countries with Past Experience

By: Alexandra Fotiou,Andresa Lagerborg

Following the Great Lockdown in 2020, it is important to take stock of lessons learned. How effective have different containment measures been in slowing the spread of Covid-19? Have containment measures been costly in terms of economic growth, fiscal balances, and accumulated debt? This paper finds that countries with previous SARS experience acted fast and "smart", and were able to contain the virus by relying mainly on public health measures ─ testing, contact tracing, and public information campaigns ─ rather than stay-at-home requirements. Using past coronavirus outbreaks as an instrumental variable, we show that countries with past experience were able to contain the virus in a smart way, reducing transmission and deaths while also experiencing higher economic growth in 2020.

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