Fiscal Regimes in the EU

Testing the Fiscal Theory of Price Level for Türkiye with Fourier-Based Empirical Approaches

“…Moreover, in studies that include the period 2008 global financial crisis, transitions from an R. regime to N.R. regimes or N.R regimes were determined (Afonso and Toffano, 2013;Doi, 2018;Panjer et al, 2020;Urquhart, 2022). In equation 2, the primary budget surplus on the right side of the equation is determined arbitrarily, and it is argued that the price level on the left side of the equation will "jump" corresponding to the fiscal payment requirements.…”

Monetary Policy Surprise Shocks Under Different Fiscal Regimes: A Panel Analysis of the Euro Area

“…Furthermore, in the Online Appendix we performed a robustness analysis, in which: (1) we insert all the monetary surprises, even the negative ones; (2) we do a panel analysis in which we take only the Euro Area core countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain. In general, the main results do not change.…”

“…(1) an unconditional linear model (LM), (2) a conditional threshold model (TM) on the fiscal stances(Jordà, 2005), and (3) a conditional smooth-transition model (STM), based in Gorodnichenko (2012, 2017).…”

“…𝑦 𝑖,𝑡+ℎ = 𝛼 𝑖 ℎ + 𝛽 ℎ 𝑠ℎ𝑜𝑐𝑘 𝑖,𝑡 + 𝜙 ℎ 𝑥 𝑖,𝑡 + 𝑢 𝑖,𝑡+ℎ , ℎ = 0,1, … , 𝐻 − 1(1) where 𝑦 𝑡+ℎ is our variable of interest or real output, 𝛼 𝑖 ℎ are counry-fixed effects, 𝑠ℎ𝑜𝑐𝑘 𝑖,𝑡 are our monetary surprises, and 𝑥 𝑖𝑡 is the vector of control variables that includes two lags of the LHS variables. The coefficient 𝛽 ℎ corresponds to the response of 𝑦 𝑡+ℎ to the shock at time t.The impulse responses are the sequence of all estimated 𝛽 ℎ .…”

Introducing Textual Measures of Central Bank Policy-Linkages Using ChatGPT

“…First, focusing on speeches helps to overcome a key difficulty in detecting the nature of policy linkages ('dominance' and 'coordination'). More specifically, using text rather than more traditional, macroeconomic data (e.g., Favero and Monacelli (2005); Afonso and Toffano (2013)) or models (Hinterlang and Hollmayr, 2022) allows us to go beyond binary assessment of monetary and fiscal dominance and provides more qualitative information about the interactions. For example, our measure, unlike traditional measures, also captures unconventional monetary policy instruments and their interaction with fiscal or financial policies.…”