Potential economic variables and actual economic policies in Europe

• Published in: Inter economics Vol. 48; no. 1; pp. 33 - 40
• Main Author: Klar, Erik
• Format: Journal Article
• Language: English
• Published: Heidelberg Springer 2013; Springer-Verlag; ZBW
• Subjects: Borrowing; Budgets; Econometrics; Economic conditions; Economic crisis; Economic Forecasting; Economic forecasts; Economic models; Economic Policy; Economic statistics; Economic theory; Economics; Economics and Finance; Estimates; Europa; Europe; European Integration; Eurozone; Federal budget; Finance; Fiscal policy; GDP; Gross Domestic Product; Konjunkturprognose; Labor Economics; Macroeconomics; Production functions; Prognoseverfahren; Public sector; Social Policy; Studies; Unemployment; Variables; Wirkungsanalyse; Wirtschaftsindikator; Wirtschaftspolitik; Europe; Crisis Country; Leibniz Information; Debt Brake; Euro Area; Macroeconometric Model
• ISSN: 1613-964X; 0020-5346; 1613-964X
• DOI: 10.1007/s10272-013-0442-2

Ignoring for a moment the debate on whether balanced budget rules are a sensible idea from a macroeconomic point of view, there remains a major problem with tying one’s fi scal policy to econometric estimates of potential variables: their notorious unreliability. With every one of its biannual economic forecasts, the EC provides revised estimates of structural parameters that are crucial components of its macroeconometric models and, by extension, its economic policy advice. This article shows that the EC’s econometric estimates of potential growth variables in Europe have been subject to massive revisions since the financial crisis.