A dynamic rule applied to the threshold imposed on the European budgetary deficits
AbstractUp until now, European fiscal discipline has been essentially assessed on the basis of the deficit rather than on the debt situations of EU countries. However, the sustainability of the public debt depends on the discrepancy between the interest rate and the growth rate of any given country. As these future economic variables are difficult to anticipate, however, the present paper proposes a more applicable rule for the deficits. Unlike what is stated in the Stability and Growth Pact, the budgetary deficits in the European Union may therefore be kept at higher levels as a country maintains a high inflation or real growth rate, and a low level of public indebtedness.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Policy Modeling.
Volume (Year): 30 (2008)
Issue (Month): 6 ()
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Budgetary deficit Public debt Growth rate European Union Stability and Growth Pact;
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