We are doing science for policy
The Joint Research Centre (JRC) is the European Commission's science and knowledge service which employs scientists to carry out research in order to provide independent scientific advice and support to EU policy.
The economic and financial crisis has revealed a number of weaknesses in the economic governance of the EU's economic and monetary union. To ensure the economic wellbeing of the citizens of the EU, the European Commission has among its key priorities to returning to sustainable levels of growth and employment while ensuring financial stability and stable public finances.
Stimulating economic recovery in Europe requires monitoring the economic developments in Member States. It also requires completing the single market in financial services in order to guarantee stable financial markets and public finances.
The JRC develops mathematical models and computational tools that assist the relevant Commission Services, in connection with the Member States, in taking informed policy decisions aimed to create a stronger financial sector and to return to economic growth in the EU. The JRC contributes to assess the impact of changes in financial regulation and to develop economic policies that are effective in stabilising the economy in the short term while increasing potential growth in the medium-long run.
In the area of financial services regulation, the European Commission is adopting a number of initiatives as a response to the crisis, including measures to increase protection for bank depositors, to strengthen capital requirements for financial institutions and to improve cross-border crisis management in the banking sector.
In relation to the broad area of the macroeconomic and fiscal surveillance, the JRC provides scientific support to European Commission policy process and decision-making. This is achieved by developing, simulating and estimating a wide range of macro-econometric models: from small/medium scale to large scale ones (GAP, GM and QUEST). The models are used by DG ECFIN for its macroeconomic policy assessments in the context of the Stability and Growth Pact, and the European Semester, including the Macroeconomic Imbalance Procedure and the European Economic Forecasts.
The JRC’s expertise on econometrics, statistics and financial markets modelling support the Commission in improving prudential regulation for EU banks and insurances and addressing financial risk. This mainly involves the use of SYMBOL (the Systemic Model of Banking Originated Losses).
The GM and QUEST III model, developed by the JRC in collaboration with the Commission’s Directorate-General for Economic and Financial Affairs, are used to support the Commission in the European Semester macroeconomic and fiscal surveillance tasks.
The RHOMOLO model, developed by the JRC in collaboration with the Commission’s Directorate-General for Regional and Urban Policy, is used for a range of impact assessments of the European Structural and Investment Funds and of the European Investment Bank's investment projects.
The Stability and Growth Pact (SGP) is a framework for the harmonisation of the national fiscal policies of countries within the economic and monetary union (EMU). The JRC calculates the potential growth and output gap, which is an important factor to consider when fostering the implementation of this framework.