A Simple and Flexible Alternative to the Stability and Growth Pact Deficit Ceilings. Is it at hand?
AbstractThere have been widespread criticisms of EMU fiscal institutions. We consider a simple alternative to the deficit ceilings envisaged in the Stability and Growth Pact. We advocate the adoption of deficit targets. National governments should retain discretion in setting deviations from targets, but these deviations should then be reversed following a predetermined rule. This ensures fiscal discipline and leaves room for stabilisation policies. For the rule to be credible, only small changes are required to current EMU institutions. Our scheme performs well in comparison with existing reform proposals and is consistent with the golden rule of deficit financing.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1006.
Date of creation: 2003
Date of revision:
Other versions of this item:
- V. Anton Muscatelli & Piergiovanna Natale & Patrizio Tirelli, 2010. "A simple and flexible alternative to the Stability and Growth Pact deficit ceilings. Is it at hand?," Working Papers, University of Milano-Bicocca, Department of Economics 195, University of Milano-Bicocca, Department of Economics, revised Jul 2010.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
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