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Should Europe Get Rid of the Stability and Growth Pact?

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  • Thierry Warin

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Abstract

The paper addresses the question of the abolition of the Stability and Growth Pact. More and more authors and policymakers are arising the negative impacts of the European deficit rule on te countries and their ability to respond an asymmetric economic shock. Some others are asking for a redefinition of the Pact. If the focus is only fiscal and in light of the non-respect of the Pact by two of the biggest countries in Europe since its implementation, it could be demonstrated that the SGP needs at least a reexamination. To the converse, if we introduce into the analysis its impacts on the European structural policies, things are different and getting rid of the SGP could hinder the still up-to-date convergence prospective. Indeed, this paper proposed a theoretical analysis of the SGP that emphasizes a new feature of the SGP: a strong incentive to structural reforms.

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File URL: http://www.middlebury.edu/services/econ/repec/mdl/ancoec/0415warin.pdf
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Bibliographic Info

Paper provided by Middlebury College, Department of Economics in its series Middlebury College Working Paper Series with number 0415.

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Length: 25 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:mdl:mdlpap:0415

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  1. Reuven Glick & Michael Hutchison, 1993. "Fiscal policy in monetary unions: Implications for Europe," Open Economies Review, Springer, vol. 4(1), pages 39-65, March.
  2. Buiter, Willem H & Corsetti, Giancarlo & Roubini, Nouriel, 1992. "`Excessive Deficits': Sense and Nonsense in the Treaty of Maastricht," CEPR Discussion Papers 750, C.E.P.R. Discussion Papers.
  3. Jay H. Bryson, 1994. "Fiscal policy coordination and flexibility under European Monetary Union: implications for macroeconomic stabilization," International Finance Discussion Papers 467, Board of Governors of the Federal Reserve System (U.S.).
  4. Eichengreen, Barry, 1990. "Is Europe an Optimum Currency Area?," Department of Economics, Working Paper Series qt40m5g6pp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Beetsma, R.M.W.J. & Bovenberg, A.L., 1995. "The Interaction of Fiscal and Monetary Policy in a Monetary Union: Balancing Credibility and Flexibility," DELTA Working Papers 95-24, DELTA (Ecole normale supérieure).
  6. Bryson, Jay H., 1994. "Fiscal policy coordination and flexibility under European Monetary Union: Implications for macroeconomic stabilization," Journal of Policy Modeling, Elsevier, vol. 16(6), pages 541-557, December.
  7. Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, vol. 109(458), pages 546-71, October.
  8. Antonio Fat·s & Ilian Mihov, 2003. "On Constraining Fiscal Policy Discretion in EMU," Oxford Review of Economic Policy, Oxford University Press, vol. 19(1), pages 112-131.
  9. Vranceanu, Radu & Warin, Thierry, 2001. "EMU: Optimal Fiscal Strategy and the Punishment Effectiveness," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 494-504, August.
  10. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 65-113, 04.
  11. Andersen, Torben M. & Sorensen, Jan Rose, 1995. "Unemployment and fiscal policy in an economic and monetary union," European Journal of Political Economy, Elsevier, vol. 11(1), pages 27-43, March.
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Cited by:
  1. Thierry Warin, 2005. "Stability and Growth Pact: An Index to Trigger an Early Warning Earlier?," Middlebury College Working Paper Series 0502, Middlebury College, Department of Economics.

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