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Do we need fiscal rules ?

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  • Catherine Mathieu

    (OFCE)

  • Henri Sterdyniak

    (OFCE)

Abstract

The public finances crisis has brought binding fiscal rules proposals back to the forefront. The paper analyses their justifications and specifications, either in a classical or in a Keynesian framework. In the recent period there is no evidence that public deficits were caused by fiscal indiscipline and induced too high interest rates; there is no evidence that economically relevant rules can be designed. The paper provides an analysis of fiscal rules implemented either at country level (like the UK golden rule), or at the EU level (the Stability and Growth Pact). The paper shows that fiscal rules did not work before and during the crisis. The paper discusses the EU project, the “Fiscal Pact”, which risks to paralyse fiscal policies and to prevent economic stabilisation. The priority today is not to strengthen public finance discipline but to question economic developments which make public deficits necessary to support output.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/dambferfb7dfprc9lip1oi0sn.

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Date of creation: Jan 2013
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Publication status: Published in Revue de l'OFCE - Débats et politiques, 2013, pp.189-233
Handle: RePEc:spo:wpmain:info:hdl:2441/dambferfb7dfprc9lip1oi0sn

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  1. Mathieu, Catherine & Sterdyniak, Henri, 2011. "Finances publiques, sorties de crise..," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/12010, Paris Dauphine University.
  2. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 27(1), pages 129-147, February.
  3. Eisner, Robert, 1989. "Budget Deficits: Rhetoric and Reality," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 3(2), pages 73-93, Spring.
  4. Allen Schick, 2010. "Post-Crisis Fiscal Rules: Stabilising Public Finance while Responding to Economic Aftershocks," OECD Journal on Budgeting, OECD Publishing, OECD Publishing, vol. 10(2), pages 1-18.
  5. Simon Wren-Lewis, 2011. "Lessons from Failure: Fiscal Policy, Indulgence and Ideology," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 217(1), pages R31-R46, July.
  6. Henri Sterdyniak & Catherine Mathieu, 2004. "Réformer le Pacte de stabilité : l'état du débat," Macroeconomics, EconWPA 0411019, EconWPA, revised 07 Dec 2004.
  7. Charles Wyplosz, 2011. "Fiscal Discipline: Rules Rather than Institutions," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 217(1), pages R19-R30, July.
  8. Doluca, Hasan & Hübner, Malte & Rumpf, Dominik & Weigert, Benjamin, 2012. "The European Redemption Pact: An illustrative guide," Working Papers, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung 02/2012, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
  9. Tabellini, Guido & Alesina, Alberto, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Scholarly Articles 3612769, Harvard University Department of Economics.
  10. Catherine Mathieu & Henri Sterdyniak, 2009. "La globalisation financière en crise," Revue de l'OFCE, Presses de Sciences-Po, Presses de Sciences-Po, vol. 0(3), pages 13-73.
  11. Ludger Schuknecht, 2001. "The Implementation of the Stability and Growth Pact," OECD Journal on Budgeting, OECD Publishing, OECD Publishing, vol. 1(3), pages 81-116.
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Cited by:
  1. IMK Düsseldorf & OFCE Paris & WIFO Wien, 2013. "Crisis continues to smoulder," IMK Report, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 80e-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  2. IMK Düsseldorf & OFCE Paris & WIFO Wien, 2013. "Die Krise schwelt weiter," IMK Report, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 80-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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