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Stability Criteria and Convergence: The Role of the System of National Accounts for Fiscal Policy in Europe

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  • Tilman Brück
  • Andreas Cors
  • Klaus F. Zimmermann
  • Rudolf Zwiener

Abstract

The standardisation of the European systems of national accounts has progressed significantly in recent years. Some room for interpretation remains in regard to some accounting standards, the periodicity of the data, and the quality of the forecasts of budget deficits. Yet national accounts data of the eurozone countries are now a reliable basis for macroeconomic policy decisions. The stability and growth pact of the eurozone countries relies heavily on one indicator of fiscal discipline, the budget deficit as a share of gross domestic product. Drawing from simulation evidence of the German economy, it is argued that fulfilling the deficit target is no guarantee for achieving output stabilisation. The pact hence fails to internalise the externalities arising from a decentralised fiscal policy in the European monetary union. The deficit target could be replaced with an expenditure target. Given the macroeconomic policy objectives of the euro economies it would be more appropriate to hand the supervision of an amended stability pact to an independent council of economic experts. Such council could assess the macroeconomic environment more carefully and could have the authority to caution and fine fiscally irresponsible eurozone governments.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38581.de/dp318.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 318.

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Length: 27 p.
Date of creation: 2002
Date of revision:
Handle: RePEc:diw:diwwpp:dp318

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Keywords: Simulation; fiscal policy; international policy coordination;

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References

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  1. Paul De Grauwe, 2000. "Monetary Policies in the Presence of Asymmetries," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(4), pages 593-612, November.
  2. Alan J. Auerbach & Daniel Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," NBER Working Papers 7662, National Bureau of Economic Research, Inc.
  3. Donatella Gatti, 2002. "Co-ordinating fiscal authorities in the euro-zone: a key role for the ECB," Oxford Economic Papers, Oxford University Press, vol. 54(1), pages 56-71, January.
  4. Buti, Marco & Franco, Daniele & Ongena, Hedwig, 1998. "Fiscal Discipline and Flexibility in EMU: The Implementation of the Stability and Growth Pact," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 14(3), pages 81-97, Autumn.
  5. Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(458), pages 546-71, October.
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  7. Uhlig, H.F.H.V.S., 2002. "One Money, But Many Fiscal Policies in Europe: What are the Consequences?," Discussion Paper, Tilburg University, Center for Economic Research 2002-32, Tilburg University, Center for Economic Research.
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  10. Gottfried Haber, 2001. "Simulation Analysis of Public Debt and Fiscal Deficit in Austria – Optimal Economic Policies for the Past and the Future," Empirica, Springer, Springer, vol. 28(1), pages 69-95, March.
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  12. Michael J. Artis & Marco Buti, 2000. "Close to Balance or in Surplus. A Policy Maker’s Guide to the Implementation of the Stability and Growth Pact," EUI-RSCAS Working Papers, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS) 28, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
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  15. repec:sae:niesru:v:174:y::i:1:p:92-104 is not listed on IDEAS
  16. De Grauwe, Paul, 2000. "Monetary Policies In The Presence Of Asymmetries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2393, C.E.P.R. Discussion Papers.
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Cited by:
  1. 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, Elsevier, vol. 28(4), pages 357-369, May.
  2. Dolls, Mathias & Peichl, Andreas & Zimmermann, Klaus F., 2011. "Eine Herausforderung für die G20: Global vereinbarte Schuldenbremsen und transnationale fiskalpolitische Aufsichtsgremien," IZA Standpunkte, Institute for the Study of Labor (IZA) 45, Institute for the Study of Labor (IZA).

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