Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/262133 
Year of Publication: 
2022
Series/Report no.: 
ECB Occasional Paper No. 288
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
A key element of the European reform agenda is to simplify the EU fiscal governance framework by moving towards a single debt anchor and a single operational indicator as the basis for formulating fiscal targets and assessing compliance. This paper puts forward an in-depth analysis of two alternative fiscal performance indicators currently used in the EU fiscal framework: the change in the structural balance and the expenditure benchmark. Comparing these two indicators allows us to identify options for the design of a fiscal performance measure - such as assumptions on cyclical adjustment and the inclusion of fiscal variables - and assess their policy impact. Our paper finds that the expenditure benchmark used in the EU fiscal governance framework has advantages over the change in the structural balance. However, it still has scope for improvement. The paper also shows that taking account of interest payments in the expenditure benchmark would make fiscal policy more supportive of the monetary policy stance.
Subjects: 
EMU
euro area
fiscal governance
Stability and Growth Pact
JEL: 
C54
E62
E65
F54
F47
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4842-5
Document Type: 
Research Report

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