Stability and Growth Pact II: Incentives and Moral Hazard
AbstractAdopted in 1997 and implemented in 1999 with the euro, the Stability and Growth Pact (SGP) addresses concerns of budgetary discipline in the Economic and Monetary Union (EMU). After many breaches and the failure of the implementation of fines, Europe amended the SGP on 20 March 2005. In the new institutional design, the preventive element is now tighter, but the dissuasive element is laxer. Using a game theoretical approach emphasizing the notion of moral hazard, we find that the new design does not prevent countries from engaging in moral hazard behaviors and countries will thus be less inclined to abide by the SGP.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.
Volume (Year): 10 (2007)
Issue (Month): 1 ()
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Web page: http://www.tandfonline.com/GPRE19
Other versions of this item:
- Andr� Four�ans & Thierry Warin, 2007. "Stability and Growth Pact II: Incentives and Moral Hazard," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(1), pages 51-62.
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