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Deficit Policy within the Framework of the Stability and Growth Pact - Empirical Results and Lessons for the Fiscal Compact

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  • Afflatet, Nicolas

    (Helmut Schmidt University, Hamburg)

Abstract

This paper examines the question whether joining EMU or the breach of the Stability and Growth Pact in 2003 had an impact on the deficit policy of member states. The empirical analysis gives no hint for an alteration of deficit policy after having joined EMU or after having breached the Pact in 2003. These results can be explained with the fact that the Pact was undermined from its beginning and only had a limited disciplining effect henceforth. Otherwise the breakout of the ongoing debt crisis would not have been possible. These results advocate a sanctioning mechanism which cannot be influenced on a political level.

Suggested Citation

  • Afflatet, Nicolas, 2016. "Deficit Policy within the Framework of the Stability and Growth Pact - Empirical Results and Lessons for the Fiscal Compact," Working Paper 168/2016, Helmut Schmidt University, Hamburg.
    • Handle: RePEc:ris:vhsuwp:2016_168
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    Citations

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    Cited by:

    1. Nicolas Afflatet & Stephanos Papadamou, 2016. "Public debt and borrowing: Are governments disciplined by financial markets?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1225346-122, December.
    2. Beckmann, Klaus B., 2017. "Bounded rationality in differential games," Working Paper 178/2017, Helmut Schmidt University, Hamburg.
    3. Bantle, Melissa & Muijs, Matthias, 2018. "A new price test in geographic market definition – an application to german retail gasoline market," Working Paper 180/2018, Helmut Schmidt University, Hamburg.

    More about this item

    Keywords

    Stability and Growth Pact; Fiscal Rules; Deficits; Fiscal Policy;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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