Fiscal Rules in the European Monetary Union: A No-Entry Clause
AbstractThe paper examines the possible motivations behind the plea for fiscal rules in the Delors Report. We argue that coordination problems arising from aggregate demand spillovers cannot be solved by means of budget rules and that in any case they are not important in Europe. We then discuss the notion of structural fiscal imbalances and show that potential solvency is a problem for some European countries, probably made more severe by EMU. Membership of countries with unsustainable positions may represent a risk for the stability of the union because of financial spillovers. Neither monetary discipline enforced by a `conservative' European Central Bank nor market discipline will by themselves prevent fiscal indiscipline or insulate the union from its consequences. Specific sanctions are needed to affect political choices by creating a trade-off between debt and monetary stability. The most effective sanction in our view would be a no-entry clause, such that membership is made contingent upon specifically defined changes in the fiscal positions of the countries concerned.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 516.
Date of creation: Jan 1991
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Varadarajan V. Chari & Patrick J. Kehoe, 2008.
"Time Inconsistency and Free-Riding in a Monetary Union,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 40(7), pages 1329-1356, October.
- V. V. Chari & Patrick J. Kehoe, 2008. "Time inconsistency and free-riding in a monetary union," Staff Report 308, Federal Reserve Bank of Minneapolis.
- V. V. Chari & Patrick J. Kehoe, 2002. "Time Consistency and Free-Riding in a Monetary Union," NBER Working Papers 9370, National Bureau of Economic Research, Inc.
- V. V. Chari & Patrick J. Kehoe, 2010. "Time Inconsistency and Free-Riding in a Monetary Union," Levine's Working Paper Archive 506439000000000084, David K. Levine.
- Mélitz, Jacques, 1991.
"Brussels on a Single Money,"
CEPR Discussion Papers
556, C.E.P.R. Discussion Papers.
- Robert Holzmann & Yves Hervé & Roland Demmel, 1996. "The maastricht fiscal criteria: Required but ineffective?," Empirica, Springer, vol. 23(1), pages 25-58, February.
- M. Marãˆ & M. Sarcinelli, 1994. "The European Union: how to assign the functions of government," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 47(191), pages 341-377.
- M. Marãˆ & M. Sarcinelli, 1994. "The European Union: how to assign the functions of government," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 47(191), pages 341-377.
- F. Passacantando, 1996. "Building an institutional framework for monetary stability: the case of Italy (1979-1994)," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 49(196), pages 83-132.
- F. Passacantando, 1996. "Building an institutional framework for monetary stability: the case of Italy (1979-1994)," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 49(196), pages 83-132.
- Anthony J. Pellechio & Saqib Rizavi & Phebby Kufa, 2003. "Fiscal Sustainability and Policy Issues in the Eastern Caribbean Currency Union," IMF Working Papers 03/162, International Monetary Fund.
- Heinemann, Friedrich, 1994. "Verschuldungsanreize in der Wirtschafts- und Währungsunion," ZEW Discussion Papers 94-02, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.