I have a new paper on fiscal consolidation and its growth effects. I review how large the fiscal consolidations in €zone countries were in the past, what the research record shows about growth effects, and what that implies for the austerity outlook for the next years. Thread 🧵 Pressure to implement fiscal consolidation during the early 1990s coincided with the introduction of the Maastricht provisions. On average, the €zone countries had a cumulative fiscal adjustment of 5.3% of GDP over the 1992-1998 period, with the largest consolidation in Italy.

How far from full employment? Our paper in European Economic Review: based on unemployment-vacancy data, we find full employment episodes in EU countries during the 1970s. Labour markets became tighter when recovering from COVID-19, but few countries hit full employment. Thread: Based on contributions by Michaillat/Saez, we apply a full employment concept derived from the unemployment-vacancies relationship to European countries. We use the Beveridge (full employment-consistent) rate of unemployment (BECRU) to study labour markets over 1970-2022.

Do higher public debt levels reduce economic growth? My meta-analysis is out in the September issue of Journal of Economic Surveys. By analysing 816 estimates, I find
- publication bias in favour of negative growth effects
- no uniform public-debt-to-GDP threshold

Summary 🧵 Reinhart/Rogoff (2010) had an impact on the policy debate; policy-makers used their results (threshold in public-debt-to-GDP of 90% beyond which growth slows) to argue for austerity. But what does the evidence tell us about growth effects of higher public debt? /2

How did Italy become the Eurozone's Achilles heel, the monetary union's most vulnerable spot? In a new working paper, we answer this question by reassessing Italy's long decline in the context of European integration and globalisation 🧵 Italy is the Eurozone's Achilles heel; its large economy has fallen behind other Eurozone peers; given the Eurozone's institutions and rules, there are constantly questions on how to manage Italy's high public debt under constraints on monetary, fiscal, industrial and wage policy

We need to promote public debate on fiscal policy and EU fiscal rules. Yesterday, I did a presentation in Vienna on climate investment in the context of public investment needs and EU fiscal rules reform. I stressed three main points (short thread):

https://twitter.com/GeorgFeigl/status/1643609786427006976

1. If policymakers are serious about meeting the climate goals, they will need to significantly increase public investment for climate and energy. We are talking about *additional* public investment of at least 1% of EU GDP per year.

The European Parliament requested me to write a study assessing the European Commission's orientations on reforming EU fiscal rules, with a focus on Debt Sustainability Analysis as an anchor for bilateral negotiations and surveillance.

Here is a summary of my main results 🧵 The Commission’s (COM) orientations (published in November 2022) were welcomed by the conclusions of the Council of the EU on March 14th 2023. COM proposes an enhanced role for debt sustainability analysis (DSA) in assessing fiscal risks. Focus: bringing down public debt ratios.

Let's introduce a permanent EU investment fund for climate and energy bringing additional public investment of 1% of EU GDP per year. In a new study, @alichtenberger_ and I argue this would promote the green transition and strengthen the EU economically and politically. Thread🧵 Meeting the climate goals requires additional investment. The share of public funding for climate investments needs to be significant. Additional of green public investment of at least 1% of EU economic output is need annually, which would help mobilise further private investment

It's general election day in Italy. I have again seen lots of strange stories and statements on Italy in the international press.

So here's a data-based summary thread that may help in debunking claims about a "profligate, reform-lazy Italy", pulling all of Europe down. 🧵#CAIN "Italy has been living beyond its means; now Italians finally need to adjust!"

In fact, 🇮🇹 has exported more goods and services than it imported since 2012 - also during the Covid crisis. Italians consume less than they produce - living below their means.

Do higher public debt levels reduce economic growth? My meta-analysis is out in Journal of Economic Perspectives. By analysing 816 estimates, I find

-publication bias in favor of negative growth effects
-no uniform public-debt-to-GDP threshold

🧵with summary and free paper link Reinhart/Rogoff (2010) had an impact on the policy debate; policy-makers used their results (threshold in public-debt-to-GDP of 90% beyond which growth slows) to argue for austerity. But what does the evidence allow us to infer about growth effects of higher public debt? /2

Important: the position paper of the 🇩🇪 government on reforming EU fiscal rules is less hawkish and more nuanced than the recent Handelsblatt interview with finance minister Lindner. - eliminate debt reduction rule but enforce preventive arm more strictly
- keep structural deficit medium-term target, but focus more on expenditure rule
- commit to importance of investment ("climate-neutral transformation") by adjusting flexibility clauses (but no golden rule)

Do corporate tax cuts boost growth? Our paper is out @ European Economic Review. We meta-analyse 441 estimates from 42 studies; results imply: the attention corporate taxation has received as a source of growth has often been exaggerated. With @SGechert 🧵
sciencedirect.com/science/articl… We analyse the existing corporate tax-economic growth literature. We collect 441 estimates from 42 primary studies. Reported results are ambiguous: Corporate tax cuts increase, reduce, or do not significantly affect growth /2

Italy is back in the news due to debates over the ECB and bond purchases. Unfortunately, there are again lots of distorted stories and statements around.

Here's a data-based summary thread that may help in debunking the claims about a "profligate, reform-lazy Italy". 🧵 "Italy has been living beyond its means; now Italians finally need to adjust!"

In fact, 🇮🇹 has exported more goods and services than it imported since 2012 - also during the Covid crisis. Italians consume less than they produce - living below their means.

"🇮🇹 fails to do structural reforms to calm investors."

This ignores major rounds of labour market deregulation since early 1990s with contested macro effects. Furthermore, 🇮🇹 has committed to "structural reforms" with Next Gen EU. "Homework" language remains divisive. #CAIN 🧵 Italy has carried out many market-liberal reforms. Labour market flexibilisation brought a sharp increase in fixed-term contracts and a decline in real wages. However, these structural reforms have failed to boost Italy's productivity growth.

7 reasons why the ECB should not hike interest rates by emulating the Fed. Hiking interest rates could turn out to be another strategic mistake after hiking rates into the global financial crisis and the €zone debt crisis. A thread based on my new @socialeurope article: 🧵 /1 1. The rise in inflation in the US has occurred on a broader front in goods and services. In the €zone, rising energy prices are driving inflation much more than in the US. /2

7 Gründe, warum die EZB bei Zinserhöhungen nicht der Fed nacheifern sollte. Die wirtschaftliche Lage in der €zone ist fragiler als in den USA; Energiepreise treiben stärker die Inflation; Zinserhöhungen können negative Dominoeffekte haben. Mein "DiePresse"-Gastkommentar 🧵 /1 1. Der Anstieg der Inflation in den USA hat sich auf breiterer Front bei Waren und Dienstleistungen vollzogen. In der Eurozone treiben die steigenden Energiepreise die Inflation viel stärker an als in den USA. /2

Remember Reinhart/Rogoff and debates over higher public debt levels reducing growth?

My new paper meta-analyses 826 existing estimates:

-publication bias in favor of negative growth effects
-non-existence of uniform public-debt-to-GDP thresholds

Thread
wiiw.ac.at/do-higher-publ… Reinhart/Rogoff (2010) had an impact on the policy debate; policy-makers used their results (threshold in public-debt-to-GDP of 90% beyond which growth slows) to argue for austerity. But what does the evidence allow us to infer about growth effects of higher public debt? /2

Guess what? Claims that CORPORATE TAX CUTS BOOST GROWTH turn out to be greatly exaggerated. In our new paper, we find that we cannot reject a zero effect once we account for publication bias in favor of growth-enhancing effects. Joint work with @SGechert:

imk-boeckler.de/de/faust-detai… We analyse the existing corporate tax-economic growth literature. We collect 441 estimates from 42 primary studies. Reported results are ambiguous: Corporate tax cuts increase, reduce, or do not significantly affect growth. /2

What is structural about unemployment in OECD countries? My paper on this question is finally in print in the current issue of "Review of Social Economy". Thread /1

tandfonline.com/eprint/PSCBHAP… The proposition that increased unemployment is to be reduced by measures that aim at deregulating the labor market (e.g. by easing employment protection, decentralizing collective bargaining, cutting minimum wage) has greatly influenced policymaking./2

Output gap nonsense: The European Commission is doing it again in its Spring forecast: producing crisis-driven, pro-cyclical downward estimates in economic slack (measured in terms of output gaps). This will reduce fiscal space once the fiscal rules are reactivated. A thread: /1 How does the COVID-19 shock affect the European Commission’s potential output estimates? In its Spring 2021 forecast, the Commission systematically reduced its potential output forecast to a larger extent in countries that suffer a larger drop in GDP. /2

Hyperinflation and the Weimar Republic: Germans hold distorted images of economic history that are firmly rooted in collective memory, fuelling current concerns about inflation. I wrote a new substack post. Thread /1

heimbergecon.substack.com/p/german-infla… Representative survey by @LHaffert, @niredeker and @tobirommel: Almost half of the respondents conflate mass unemployment and poverty of the early 1930s with the hyperinflation that ended in 1923. Conflation is more common among those educated and politically interested /2

Hyperinflation und Weimarer Republik: Ein Großteil der Deutschen hat verzerrte Bilder der Wirtschaftsgeschichte vor dem inneren Auge, die fest in die kollektive Erinnerung eingeschrieben sind und aktuelle Inflationssorgen befeuern. Mein neuer Kommentar im @handelsblatt. Thread /1 Repräsentative Umfrage @LHaffert, @niredeker und @tobirommel: Fast die Hälfte der Befragten vermischt Massenarbeitslosigkeit und Armut der frühen 1930er-Jahre mit der Hyperinflation, die 1923 ein Ende nahm. Vermischung bei Gebildeten und politisch Interessierten häufiger /2