News Archive

How big should government be? António Afonso and Ludger Schuknecht link the recent findings of Data Envelope Analysis on public expenditure to the size of government. Their analysis of government performance indicators in relation to public expenditure finds the biggest expenditure categories have the highest savings potential.

In the debate on euro area fiscal governance, the current deficit rules of the EU have repeatedly been criticised to have a pro-cyclical effect, leading to overly lax fiscal policies in good times and a too restrictive regime in bad times. An analysis by EconPol researchers Clemens Fuest (ifo) and Daniel Gros (CEPS) shows that most major EU countries are over-spending at a level not compatible with spending rules for sustainable public finances.

In this EconPol working paper, the authors assess the impact of announcements corresponding to different fiscal and monetary policy measures on 10-year sovereign bond yield spreads. They find that the European Commission’s releases of excessive deficit procedure have a significant impact on the yield spreads. EC releases of higher debt and better budget balance forecasts contribute to the rise and decline of spreads, respectively.

Increasing the legal retirement age is politically feasible if policy contains the generosity of public pensions, conclude the authors of this EconPol working paper. After establishing three hypotheses within a politico-economic model and employing micro data for Germany, they demonstrate that a one percentage point increase in the share of the elderly increases the legal retirement age by 0.3 to 0.5 years, and that a 10 percentage point increase in the replacement rate reduces the legal retirement age by 0.5 to 3 years.

Does activism affect the acquisition and asset sale decisions of firms that are only indirectly affected by activists? Has activism grown sufficiently in importance that it influences the equilibrium in corporate asset markets, and what is its impact on the liquidity and efficiency of these markets? These are the questions posed by EconPol researcher Ulrich Hege and his co-author Yifei Zhang in this EconPol opinion examining the rise of shareholder activism and its international expansion.