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The End of the Stability and Growth Pact?

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  • Jakob de Haan
  • Helge Berger
  • David-Jan Jansen

Abstract

This paper evaluates the Stability and Growth Pact. After examining the rules in place and the experience so far, the Pact is analysed from a political economy perspective, focusing on the choice for so-called soft law and drawing inferences from characteristics of successful fiscal rules at the state level in the United States. It is also examined whether big and small countries are likely to adhere to fiscal policy rules in place. Furthermore, the impact of the business cycle on fiscal policy outcomes is analysed. Finally, the proposals of the European Commission to strengthen the Pact are discussed.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2003/wp-cesifo-2003-12/cesifo1_wp1093.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1093.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1093

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Keywords: Stability and Growth Pact; EMU; budget discipline;

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References

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  1. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. von Hagen, Jürgen, 2003. "Fiscal discipline and growth in Euroland: Experiences with the stability and growth pact," ZEI Working Papers B 06-2003, ZEI - Center for European Integration Studies, University of Bonn.
  3. Berger, Helge & Kopits, George & Székely, István P., 2006. "Fiscal indulgence in Central Europe: loss of the external anchor?," Discussion Papers 2006/9, Free University Berlin, School of Business & Economics.
  4. Marco Buti & Paul van den Noord, 2003. "Discretionary Fiscal Policy and Elections: The Experience of the Early Years of EMU," OECD Economics Department Working Papers 351, OECD Publishing.
  5. Thomas Dalsgaard & Alain de Serres, 1999. "Estimating Prudent Budgetary Margins for 11 EU Countries: A Simulated SVAR Model Approach," OECD Economics Department Working Papers 216, OECD Publishing.
  6. Ludger Schuknecht & Albert Jaeger, 2004. "Boom-Bust Phases in Asset Prices and Fiscal Policy Behavior," IMF Working Papers 04/54, International Monetary Fund.
  7. Dermot Hodson & Imelda Maher, 2001. "The Open Method as a New Mode of Governance: The Case of Soft Economic Policy Co-ordination," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 39(4), pages 719-746, November.
  8. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
  9. A.J. Hughes Hallett & Peter McAdam, 2003. "Deficit Targeting Strategies: Fiscal Consolidation and the Probability Distribution of Deficits under the Stability Pact," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 41(3), pages 421-444, 06.
  10. Eijffinger, Sylvester & Haan, Jakob de, 2000. "European Monetary and Fiscal Policy," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198776161, October.
  11. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(449), pages 1009-25, July.
  12. Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
  13. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2003. "Revisiting the stability and growth pact: Grand design or internal adjustment?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152958, Tilburg University.
  14. Artis, Michael J & Zhang, Wenda, 1999. "Further Evidence on the International Business Cycle and the ERM: Is There a European Business Cycle?," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 120-32, January.
  15. Robert P. Inman, 1996. "Do Balanced Budget Rules Work? U.S. Experience and Possible Lessons for the EMU," NBER Working Papers 5838, National Bureau of Economic Research, Inc.
  16. Inklaar, Robert & de Haan, Jakob, 2001. "Is There Really a European Business Cycle? A Comment," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 215-20, April.
  17. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 13(26), pages 65-113, 04.
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Citations

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Cited by:
  1. Thierry Warin, 2005. "The Hidden Structural Features of the Fiscal Rule: A European Saga," International Advances in Economic Research, Springer, Springer, vol. 11(1), pages 29-38, March.
  2. Candelon, Bertrand & Muysken, Joan & Vermeulen, Robert, 2007. "Fiscal Policy and Monetary Integration in Europe: An Update," Research Memorandum 050, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  3. Andrew Hughes Hallet & Rasmus Kattai & John Lewis, 2007. "Early Warning or Just Wise After the Event?," DNB Working Papers, Netherlands Central Bank, Research Department 124, Netherlands Central Bank, Research Department.
  4. Herzog, Bodo, 2006. "Coordination of fiscal and monetary policy in CIS-countries: A theory of optimum fiscal area?," Research in International Business and Finance, Elsevier, Elsevier, vol. 20(2), pages 256-274, June.
  5. Renate Ohr & André Schmidt, 2006. "Handelbare Verschuldungsrechte zur Sicherung fiskalischer Stabilität in der Währungsunion?," Departmental Discussion Papers, University of Goettingen, Department of Economics 128, University of Goettingen, Department of Economics.
  6. Herzog, Bodo, 2005. "Why do bigger countries have more problems with the Stability and Growth Pact?," Center for European, Governance and Economic Development Research Discussion Papers 40, University of Goettingen, Department of Economics.
  7. Anthony Annett, 2006. "Enforcement and the Stability and Growth Pact," IMF Working Papers 06/116, International Monetary Fund.
  8. John P. Jackson & Mark J. Manning, 2007. "Central Bank intraday collateral policy and implications for tiering in rtgs payment systems," DNB Working Papers, Netherlands Central Bank, Research Department 129, Netherlands Central Bank, Research Department.
  9. Andrew Hughes Hallett & Rasmus Kattai & John Lewis, 2007. "Early warning or just wise after the event? The problem of using cyclically adjusted budget deficits for fiscal surveillance," Bank of Estonia Working Papers, Bank of Estonia 2007-02, Bank of Estonia, revised 09 Feb 2007.
  10. Mark Mink & Jakob de Haan, 2006. "Are there Political Budget Cycles in the Euro Area?," European Union Politics, , vol. 7(2), pages 191-211, June.
  11. Matthias Bauer & Martin Zenker, 2012. "Minor Nuisance Around Foreign Exchange Markets - Lessons from the Stability and Growth Pact Debate," Global Financial Markets Working Paper Series 2012-32, Friedrich-Schiller-University Jena.
  12. Schuknecht, Ludger, 2004. "EU fiscal rules: issues and lessons from political economy," Working Paper Series, European Central Bank 0421, European Central Bank.
  13. Bodo Herzog, 2004. "Warum verstoßen vorwiegend die großen EWU-Länder gegen den Stabilitäts- und Wachstumspakt?: Eine theoretische Beweisaufnahme," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, DIW Berlin, German Institute for Economic Research, vol. 73(3), pages 405-417.

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