The politics of fiscal policy during economic downturns, 1981-2010

This article investigates fiscal policy responses to the Great Recession in historical perspective. We explore general trends in the frequency, size and composition of fiscal stimulus as well as the impact of government partisanship on fiscal policy outputs during the four international recessions of 1980-81, 1990-91, 2001-02 and 2008-09. Encompassing 17-23 OECD countries, our analysis calls into question the idea of a general retreat from fiscal policy activism since the early 1980s. The propensity of governments to respond to economic downturns by engaging in fiscal stimulus has increased over time and we do not observe any secular trend in the size of stimulus measures. At the same time, OECD governments have relied more on tax cuts to stimulate demand in the two recessions of the 2000s than they did in the early 1980s or early 1990s. Regarding government partisanship, we do not find any significant direct partisan effects on either the size or the composition of fiscal stimulus for any of the four recession episodes. However, the size of the welfare state conditioned the impact of government partisanship in the two recessions of the 2000s, with Left-leaning governments distinctly more prone to engage in discretionary fiscal stimulus and/or spending increases in large welfare states, but not in small welfare states.

Before transparency: control and communication in Early-Modern Europe

Today, transparency is hailed as a key to good governance and economic efficiency, with national states implementing new laws to allow citizens access to information. It is therefore paradoxical that, as shown by a series of crises and scandals, modern governments and international agencies frequently have paid only lip-service to such ideals. Since Jeremy Bentham first introduced the concept of transparency into the language in 1789, few societal debates have sparked so much interest within the academic community, and across a variety of disciplines, using different approaches and methodologies. Within these current debates, however, one fact is striking: the lack of historical reflection about the development of the concept of transparency, both as a principle and as applied in practice, prior to its inception. Accordingly, the aim of this special issue is to contribute to historicising the ways in which communication and control over fiscal policy and state finances operated in early modern European polities.

Flexible rules cum constrained discretion: a new consensus in monetary policy

This paper demonstrates that recent influential contributions to monetary policy imply an emerging consensus whereby neither rigid rules nor complete discretion are found optimal. Instead, middle-ground monetary regimes based on rules (operative under 'normal' circumstances) to anchor inflation expectations over the long run, but designed with enough flexibility to mitigate the short-run effect of shocks (with communicated discretion in 'exceptional' circumstances temporarily overriding these rules), are gaining support in theoretical models and policy formulation and implementation. The opposition of 'rules versus discretion' has, thus, reappeared as the synthesis of 'rules cum discretion', in essence as inflation-forecast targeting. But such synthesis is not without major theoretical problems, as we argue in this contribution. Furthermore, the very recent real-world events have made it obvious that the inflation targeting strategy of monetary policy, which rests upon the new consensus paradigm in modern macroeconomics is at best a 'fair weather' model. In the turbulent economic climate of highly unstable inflation, deep financial crisis and world-wide, abrupt economic slowdown nowadays this approach needs serious rethinking to say the least, if not abandoning it altogether

The role of competition and state aid policy in financial and monetary law

During the financial crisis, companies and lenders found themselves in distressed situations. Competition authorities across the globe had to deal with controversial issues such as the application of the failing firm defence in merger transactions as well as assessment of emergency aid granted by states. This article considers competition policy in periods of crisis, in particular the failing firm defence in merger control and its state aid policy.

The distributional consequences of a fiscal food policy: evidence from the UK

The literature on fiscal food policies focuses on their effectiveness in altering diets and improving health, while this paper focuses on their welfare costs. A formal welfare economics framework is developed to calculate the combined individualistic and distributional impacts of a tax-subsidy. Distributional characteristics of foods targeted by a tax tend to be concentrated in lower-income households. Further, consumption of fruit and vegetables tends to be concentrated in higher-income households; therefore, a subsidy on such foods increases regressivity. Aggregate welfare changes that result from a fiscal food policy are found to range from an increase of 1.41 per cent to a reduction of 2.06 per cent according to whether a subsidy is included, the degree of inequality aversion, and whether substitution among foods is allowed.

The housing market channel of monetary policy transmission in the Euro area

Purpose – The purpose of this paper is to explore the role of the housing market in the monetary policy transmission to consumption among euro area member states. It has been argued that the housing market in one country is then important when its mortgage market is well developed. The countries in the euro area follow unitary monetary policy, however, their housing and mortgage markets show some heterogeneity, which may lead to different policy effects on aggregate consumption through the housing market. Design/methodology/approach – The housing market can act as a channel of monetary policy shocks to household consumption through changes in house prices and residential investment – the housing market channel. We estimate vector autoregressive models for each country and conduct a counterfactual analysis in order to disentangle the housing market channel and assess its importance across the euro area member states. Findings – We find little evidence for heterogeneity of the monetary policy transmission through house prices across the euro area countries. Housing market variations in the euro area seem to be better captured by changes in residential investment rather than by changes in house prices. As a result we do not find significantly large house price channels. For some of the countries however, we observe a monetary policy channel through residential investment. The existence of a housing channel may depend on institutional features of both the labour market or with institutional factors capturing the degree of household debt as is the LTV ratio. Originality/value – The study contributes to the existing literature by assessing whether a unitary monetary policy has a different impact on consumption across the euro area countries through their housing and mortgage markets. We disentangle monetary-policy-induced effects on consumption associated with variations on the housing markets due to either house price variations or residential investment changes. We show that the housing market can play a role in the monetary transmission mechanism even in countries with less developed mortgage markets through variations in residential investment.

Policy interventions to promote healthy eating: a review of what works, what does not and what is promising

Unhealthy diets can lead to various diseases, which in turn can translate into a bigger burden for the state in the form of health services and lost production. Obesity alone has enormous costs and claims thousands of lives every year. Although diet quality in the European Union has improved across countries, it still falls well short of conformity with the World Health Organization dietary guidelines. In this review, we classify types of policy interventions addressing healthy eating and identify through a literature review what specific policy interventions are better suited to improve diets. Policy interventions are classified into two broad categories: information measures and measures targeting the market environment. Using this classification, we summarize a number of previous systematic reviews, academic papers, and institutional reports and draw some conclusions about their effectiveness. Of the information measures, policy interventions aimed at reducing or banning unhealthy food advertisements generally have had a weak positive effect on improving diets, while public information campaigns have been successful in raising awareness of unhealthy eating but have failed to translate the message into action. Nutritional labeling allows for informed choice. However, informed choice is not necessarily healthier; knowing or being able to read and interpret nutritional labeling on food purchased does not necessarily result in consumption of healthier foods. Interventions targeting the market environment, such as fiscal measures and nutrient, food, and diet standards, are rarer and generally more effective, though more intrusive. Overall, we conclude that measures to support informed choice have a mixed and limited record of success. On the other hand, measures to target the market environment are more intrusive but may be more effective.

Mid-term evaluation of African Technology Policy Studies Network Phase VI Strategic Plan: for the period January 1, 2009 to December 31, 2010

The African Technology Policy Studies Network (ATPS) is a multidisciplinary network of researchers, private sector actors, policymakers and civil society. ATPS has the vision to become the leading international centre of excellence and reference in science, technology and innovation (STI) systems research, training and capacity building, communication and sensitization, knowledge brokerage, policy advocacy and outreach in Africa. It has a Regional Secretariat in Nairobi Kenya, and operates through national chapters in 29 countries (including 27 in Africa and two Chapters in the United Kingdom and USA for Africans in the Diaspora) with an expansion plan to cover the entire continent by 2015. The ATPS Phase VI Strategic Plan aims to improve the understanding and functioning of STI processes and systems to strengthen the learning capacity, social responses, and governance of STI for addressing Africa's development challenges, with a specific focus on the Millennium Development Goals (MDGs). A team of external evaluators carried out a midterm review to assess the effectiveness and efficiency of the implementation of the Strategic Plan for the period January 1, 2009 to December 31, 2010. The evaluation methodology involved multiple quantitative and qualitative methods to assess the qualitative and quantitative inputs (human resources, financial resources, time, etc.) into ATPS activities (both thematic and facilitative) and their tangible and intangible outputs, outcomes and impacts. Methods included a questionnaire survey of ATPS members and stakeholders, key informant interviews, and focus group discussions (FGDs) with members in six countries. Effectiveness of Programmes Under all six strategic goals, very good progress has been made towards planned outputs and outcomes. This is evidenced by key performance indicators (KPIs) generated from desk review, ratings from the survey respondents, and the themes that run through the FGDs. Institutional and Programme Cost Effectiveness Institutional Effectiveness: assessment of institutional effectiveness suggests that adequate management frameworks are in place and are being used effectively and transparently. Also technical and financial accounting mechanisms are being followed in accordance with grant agreements and with global good practice. This is evidenced by KPIs generated from desk review. Programme Cost Effectiveness: assessment of cost-effectiveness of execution of programmes shows that organisational structure is efficient, delivering high quality, relevant research at relatively low cost by international standards. The evidence includes KPIs from desk review: administrative costs to programme cost ratio has fallen steadily, to around 10%; average size of research grants is modest, without compromising quality. There is high level of pro bono input by ATPS members. ATPS Programmes Strategic Evaluation ATPS research and STI related activities are indeed unique and well aligned with STI issues and needs facing Africa and globally. The multi-disciplinary and trans-boundary nature of the research activities are creating a unique group of research scientists. The ATPS approach to research and STI issues is paving the way for the so called Third Generation University (3GU). Understanding this unique positioning, an increasing number of international multilateral agencies are seeking partnership with ATPS. ATPS is seeing an increasing level of funding commitments by Donor Partners. Recommendations for ATPS Continued Growth and Effectiveness On-going reform of ATPS administrative structure to continue The on-going reforms that have taken place within the Board, Regional Secretariat, and at the National Chapter coordination levels are welcomed. Such reform should continue until fully functional corporate governance policy and practices are fully established and implemented across the ATPS governance structures. This will further strengthen ATPS to achieve the vision of being the leading STI policy brokerage organization in Africa. Although training in corporate governance has been carried out for all sectors of ATPS leadership structure in recent time, there is some evidence that these systems have not yet been fully implemented effectively within all the governance structures of the organization, especially at the Board and National chapter levels. Future training should emphasize practical application with exercises relevant to ATPS leadership structure from the Board to the National Chapter levels. Training on Transformational Leadership - Leading a Change Though a subject of intense debate amongst economists and social scientists, it is generally agreed that cultural mindsets and attitudes could enhance and/or hinder organizational progress. ATPS’s vision demands transformational leadership skills amongst its leaders from the Board members to the National Chapter Coordinators. To lead such a change, ATPS leaders must understand and avoid personal and cultural mindsets and value systems that hinder change, while embracing those that enhance it. It requires deliberate assessment of cultural, behavioural patterns that could hinder progress and the willingness to be recast into cultural and personal habits that make for progress. Improvement of relationship amongst the Board, Secretariat, and National Chapters A large number of ATPS members and stakeholders feel they do not have effective communications and/or access to Board, National Chapter Coordinators and Regional Secretariat activities. Effort should be made to improve the implementation of ATPS communication strategy to improve on information flows amongst the ATPS management and the members. The results of the survey and the FGDs suggest that progress has been made during the past two years in this direction, but more could be done to ensure effective flow of pertinent information to members following ATPS communications channels. Strategies for Increased Funding for National Chapters There is a big gap between the fundraising skills of the Regional Secretariat and those of the National Coordinators. In some cases, funds successfully raised by the Secretariat and disbursed to national chapters were not followed up with timely progress and financial reports by some national chapters. Adequate training in relevant skills required for effective interactions with STI key policy players should be conducted regularly for National Chapter coordinators and ATPS members. The ongoing training in grant writing should continue and be made continent-wide if funding permits. Funding of National Chapters should be strategic such that capacity in a specific area of research is built which, with time, will not only lead to a strong research capacity in that area, but also strengthen academic programmes. For example, a strong climate change programme is emerging at University of Nigeria Nsukka (UNN), with strong collaborations with Universities from neighbouring States. Strategies to Increase National Government buy-in and support for STI Translating STI research outcomes into policies requires a great deal of emotional intelligence, skills which are often lacking in the first and second generation universities. In the epoch of the science-based or 2GUs, governments were content with universities carrying out scientific research and providing scientific education. Now they desire to see universities as incubators of new science- or technology-based commercial activities, whether by existing firms or start-ups. Hence, governments demand that universities take an active and leading role in the exploitation of their knowledge and they are willing to make funds available to support such activities. Thus, for universities to gain the attention of national leadership they must become centres of excellence and explicit instruments of economic development in the knowledge-based economy. The universities must do this while working collaboratively with government departments, parastatals, and institutions and dedicated research establishments. ATPS should anticipate these shifting changes and devise programmes to assist both government and universities to relate effectively. New administrative structures in member organizations to sustain and manage the emerging STI multidisciplinary teams Second Generation universities (2GUs) tend to focus on pure science and often do not regard the application of their know-how as their task. In contrast, Third Generation Universities (3GUs) objectively stimulate techno-starters – students or academics – to pursue the exploitation or commercialisation of the knowledge they generate. They view this as being equal in importance to the objectives of scientific research and education. Administratively, research in the 2GU era was mainly monodisciplinary and departments were structured along disciplines. The emerging interdisciplinary scientific teams with focus on specific research areas functionally work against the current mono-disciplinary faculty-based, administrative structure of 2GUs. For interdisciplinary teams, the current faculty system is an obstacle. There is a need for new organisational forms for university management that can create responsibilities for the task of know-how exploitation. ATPS must anticipate this and begin to strategize solutions for their member institutions to transition to 3Gus administrative structure, otherwise ATPS growth will plateau, and progress achieved so far may be stunted.

Plant-soil interactions and grassland diversity restoration

Restoration schemes aimed at enhancing plant species diversity of improved agricultural grassland have been a key feature of agri-environmental policy since the mid 1980s. Allied to this has been much research aimed at providing policy makers with guidelines on how best to manage grassland to restore botanical diversity. This research includes long-term studies of the consequences for grassland diversity of management techniques such as different hay cut dates, fertiliser additions, seed introductions and grazing regimes. Studies have also explored the role of introductions of Rhinanthus minor into species-poor swards to debilitate competitive grasses. While these studies have been successful in identifying some management features that control plant species diversity in agricultural grassland, they have taken a largely aboveground perspective on plant community dynamics.

Making robust policy decision using global biodiversity indicators

In order to influence global policy effectively, conservation scientists need to be able to provide robust predictions of the impact of alternative policies on biodiversity and measure progress towards goals using reliable indicators. We present a framework for using biodiversity indicators predictively to inform policy choices at a global level. The approach is illustrated with two case studies in which we project forwards the impacts of feasible policies on trends in biodiversity and in relevant indicators. The policies are based on targets agreed at the Convention on Biological Diversity (CBD) meeting in Nagoya in October 2010. The first case study compares protected area policies for African mammals, assessed using the Red List Index; the second example uses the Living Planet Index to assess the impact of a complete halt, versus a reduction, in bottom trawling. In the protected areas example, we find that the indicator can aid in decision-making because it is able to differentiate between the impacts of the different policies. In the bottom trawling example, the indicator exhibits some counter-intuitive behaviour, due to over-representation of some taxonomic and functional groups in the indicator, and contrasting impacts of the policies on different groups caused by trophic interactions. Our results support the need for further research on how to use predictive models and indicators to credibly track trends and inform policy. To be useful and relevant, scientists must make testable predictions about the impact of global policy on biodiversity to ensure that targets such as those set at Nagoya catalyse effective and measurable change.

Real estate markets and the macroeconomy: a dynamic coherence framework

This paper analyzes the dynamic interactions between real estate markets, in the US and the UK and their macroeconomic environments. We apply a new approach based on a dynamic coherence function (DCF) to study these interactions bringing together different real estate markets (the securitized market, the commercial market and the residential market). The results suggest that there is a common trend that drives the different real estate markets in the UK and the US, particularly in the long run, since they have a similar shape of the DCF. We also find that, in the US, wealth and housing expenditure channels are very conductive during real estate crises. However, in the UK, only the wealth effect is significant as a transmission channel during real estate market downturns. In addition, real estate markets in the UK and the US react differently to institutional shocks. This brings some insights on the conduct of monetary policy in order to avoid disturbances in real estate markets.