The paper subjects seven structural DSGE models, all used heavily by policymaking institutions, to discretionary fiscal stimulus shocks using seven different fiscal instruments, and compares the results to those of two prominent academic DSGE models. There is considerable agreement across models on both the absolute and relative sizes of different types of fiscal multipliers. The size of many multipliers is large, particularly for spending and targeted transfers. Fiscal policy is most effective if it has moderate persistence and if monetary policy is accommodative. Permanently higher spending or deficits imply significantly lower initial multipliers. (JEL E12, E13, E52, E62)

The article analyses in a simple setting a game between an inflationconservative central bank and a fiscal authority subject to an upper limit on the budget deficit. It is shown that complementarity or substitutability between the policies and the preference of each authority for the other authority's behaviour crucially depends on the type of shock hitting the economy. If the government attempts to stimulate output beyond its natural level, a 'deficit bias' emerges under non-co-operation; under co-operation, the equilibrium is characterized by both a 'deficit bias' and an 'inflation bias'. However, if the government only pursues cyclical stabilization these biases disappear and there are positive gains from co-ordinating the policy responses to shocks. * Earlier versions of this article have been presented in several conferences and workshops. We would like to thank discussants and participants for thoughtful comments. In particular, we are grateful to Ralph Bryant, Luisa Lambertini and, especially, Jacques Mélitz. We are also indebted to a number of Commission colleagues, two anonymous referees and the editor of this journal for valuable comments. Maarten van de Stadt provided excellent research assistance. The opinions expressed are those of the authors only and should not be attributed to the European Commission. The usual disclaimer applies. 802

Fiscal consolidations, EU fiscal policy, Non-Keynesian effects of fiscal policy, E63, H30, H63,

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Economic Papers are written by the Staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author's alone and do not necessarily correspond to those of the European Commission.

The Euro Area recommendations endorsed by the European Council in 2016 called for a differentiation of the fiscal effort by individual Member States, taking into account spillovers across Euro Area countries. This article shows model-based simulations of an increase in public investment in Germany and the Netherlands and their spillovers to the rest of the Euro Area. While spillovers in a monetary union may be small when monetary policy reacts by raising interest rates, when rates are kept constant and the stimulus is accommodated, spillovers can be sizeable. An increase in (productive) spending in Germany and the Netherlands can boost GDP in these countries and also have significant positive spillovers on the rest of EA GDP, while the effects on current accounts are likely to be small. Effects can be even larger when investment is directed to the most productive projects. With low borrowing costs at present, the increase in government debt for surplus countries will be modest, while there could be an improvement in debt ratios in the rest of the Euro Area.

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