The performativity of potential output: Pro-cyclicality and path dependency in coordinating European fiscal policies

Arbeitspapier

This paper analyzes the performative impact of the European Commission's model for estimating 'potential output', which is used as a yardstick for measuring the 'structural budget balance' of EU countries and, hence, is crucial for coordinating European fiscal policies. In pre-crisis years, potential output estimates amplified the build-up of private debt, housing bubbles and macroeconomic imbalances. After the financial crisis, they were revised downwards, which increased fiscal consolidation pressures. By focusing on the euro area's economies during 1999-2014, we identify two performative aspects of the potential output model. First, the political implications of the model led to a pro- cyclical feedback loop, reinforcing general economic developments. Second, the model has contributed to national lock-ins on path dependent debt trajectories, fueling 'structural polarization' between core and periphery.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ICAE Working Paper Series ; No. 50

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: performativity ; potential output ; path dependency ; Eurozone crisis ; fiscal policy ; austerity

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kapeller, Jakob ; Heimberger, Philipp
• Ereignis: Veröffentlichung
• (wer): Johannes Kepler University Linz, Institute for Comprehensive Analysis of the Economy (ICAE)
• (wo): Linz
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/171425
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ