The annual FPS aims to bridge the gap between academic research and policy-making. This year’s topic is:
“Macroeconomic policy in times of overlapping crises”
European economies are facing overlapping crises: The Russian war against Ukraine and the associated surge in energy prices have joined the effects of the still ongoing coronavirus pandemic. The pandemic-related disruption of global supply chains amplified by the consequences of the war weigh heavily on global trade and growth prospects. As a result, inflation has reached levels not seen in decades, uncertainty has increased substantially, and growth forecasts have been revised downwards. We face substantial stagflation risks.
The aim of the 2022 Franco-German Fiscal Policy Seminar is to present cutting-edge academic work that can contribute to a better understanding of this challenging macroeconomic environment and to inform policymakers about appropriate responses in favor of more resilient economies. Featuring a policy panel and a keynote address by Florin Bibliie, University of Cambridge, the FPS further aims to facilitate discussion and the exchange of knowledge and ideas.
Research papers on the following topics in particular were submitted for the FPS by the submission deadline:
- Adequate national fiscal and economic policies in containing stagflation risks in the euro area
- Consequences and possibilities to address supply chain disruptions globally and nationally
- Geo-economic risks, resilience, and recalibration of global value chains
- Demographic and climate change, productivity trends, and the strategic rebalancing of world trade – impacts on trend inflation and implications for the euro-area policy mix
- Fiscal and monetary policy interaction in view of rising interest rates and inflation
- Challenges for fiscal sustainability in the EMU
Authors of papers selected by the Scientific Committee, chaired by Andreas Peichl (ifo Institute and University of Munich), were notified in September and invited to Berlin to present their work at the seminar.
Scientific Committee (in alphabetical order):
- Klaus Adam (University of Mannheim)
- Agnès Bénassy-Quéré (French Treasury and Paris School of Economics)
- Giancarlo Corsetti (Cambridge University)
- Essi Eerola (VATT Institute for Economic Research, Helsinki)
- Aitor Erce (Independent Research and Policy Advisor)
- Lars P. Feld (University of Freiburg)
- Gianmarco Ottaviano (Bocconi University)
- Andreas Peichl (ifo Institute and University of Munich), Chair
- Xavier Ragot (Sciences Po – CNRS and OFCE, Paris)
- Hélène Rey (London Business School)
- Almuth Scholl (University of Konstanz)
Travel and hotel expenses of the invited speakers (one per selected paper) will be covered by the German Ministry of Finance.
Winning Paper of this year’s Franco-German Fiscal Policy Seminar: “Revenue Effects of the Global Minimum Tax Under Pillar Two”
In October 2021, 137 countries and jurisdictions agreed to implement a major reform of the international corporate tax system, i.e., a global minimum tax of 15% on the profits of large multinational companies. The winning paper presents simulations of the revenue effects of the global minimum tax. Two possible scenarios are considered regarding who collects the minimum tax: The country in which the headquarters are located based on the income inclusion rule (IIR) or the host country of foreign affiliates as laid out under the qualified domestic minimum top-up tax (QDMTT).
Based on a sample of eighty-three parent countries, it is estimated that headquarters countries could collect a total revenue of EUR 179 billion globally. The EU Member States could receive EUR 67 billion from a 15% minimum top-up tax. Carve-outs reduce the potential tax revenues by approximately 14% to 22% over the entire sample. Under the current agreement, the European Union can expect a total tax revenue of EUR 55 billion yearly.