Choosing the European fiscal rule

Figures & data

Figure 1. Model overview.

Notes: This figure depicts a bird's eye's view of the model, emphasizing the economic agents and goods flows in the model.

Figure 2. Strength of the debt-to-GDP correction term and debt-to-GDP stabilization after a public consumption shock.

Figure 3. Calibration of the fiscal rule tightness parameter.

Figure 4. Comparison of deficit behaviour for the two fiscal rules.

Table 1. Volatility measures for public finances and macroeconomic quantities under the expenditure growth rule relative to the structural balance rule.

Notes: Each number is a relative volatility measure of a particular variable for the expenditure growth rule, compared to the structural balance rule. A number below unity means the volatility of a series is smaller for the expenditure growth rule, and vice versa. The quantities GDP, consumption, and investment are reported in annual growth terms and inflation in annual terms.

Table 2. Volatility measures for public finances and macroeconomic quantities under the expenditure growth rule relative to the structural balance rule – sovereign monetary policy case

Notes: Each number is a relative volatility measure of a particular variable for the expenditure growth rule, compared to the structural balance rule. A number below unity means the volatility of a series is smaller for the expenditure growth rule, and vice versa. The quantities GDP, consumption, and investment are reported in annual growth terms and inflation in annual terms.

Figure 5. Structural balance rule versus expenditure growth rule, sovereign monetary policy case – monetary policy shock.