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The European Stability Pact and Feedback Policy Effects

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  • Creel, Jérôme

    ()
    (Observatoire Françis des Conjonctures Economiques)

Abstract

With a two-country dynamic model in a monetary union with wealth private behaviors, we study the implications of public debt on monetary and fiscal policies. The model used has Keynesian features in the short run and Wicksellian ones in the long run. We analyse the effects of asymmetric fiscal policies in Euroland and show that such a situation creates two feedback effects which reduce the efficiency of economic policies. First, because of the inability of one government to implement an expansionary fiscal policy, the other government has to substitute for it to reach economic targets. Second, the ECB’s involvement in macroeconomic stabilisation will be exacerbated. The more substantial these effects, the more coordination is needed between European governments and the ECB.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 17 (2002)
Issue (Month): ()
Pages: 570-595

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Handle: RePEc:ris:integr:0209

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Web page: http://econo.sejong.ac.kr/
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Related research

Keywords: EMU; Stability and Growth Pact; Monetary Policy; Fiscal Policy; Public Debt.;

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Cited by:
  1. repec:spo:wpecon:info:hdl:2441/2085 is not listed on IDEAS
  2. Jérôme Creel & Jacques Le Cacheux, 2006. "La nouvelle désinflation compétitive européenne," Revue de l'OFCE, Presses de Sciences-Po, vol. 98(3), pages 7-36.
  3. Bruck, Tilman & Zwiener, Rudolf, 2006. "Fiscal policy rules for stabilisation and growth: A simulation analysis of deficit and expenditure targets in a monetary union," Journal of Policy Modeling, Elsevier, vol. 28(4), pages 357-369, May.
  4. repec:spo:wpecon:info:hdl:2441/3221 is not listed on IDEAS

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