The new rules of the Stability and Growth Pact. Threats from heterogeneity and interdependence
AbstractThis paper examines the new SGP rules that should govern fiscal policies of the EMU member countries by means of dynamic models of the debt/GDP ratio. The focus is on factors of heterogeneity and interdependence in the three key variables that may affect the debt/GDP evolution in a multi-country setup like a monetary union: the real growth rate, the inflation rate and the nominal interest rate on the sovereign debt stock. These factors are almost ignored in the SGP intellectual and institutional framework, but they can jeopardize the main goal of fostering convergence and keeping debt/GDP ratios equalized and stable over time. Even the return of growth, inflation and interest rates to their pre-crisis tendential values, a not so likely and imminent event, will probably be insufficient to create a favourable environment for smooth debt/GDP convergence across EMU countries.
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Bibliographic InfoPaper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 1104.
Date of creation: 2011
Date of revision:
Stability and Growth Pact; Public debt management;
Find related papers by JEL classification:
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-16 (All new papers)
- NEP-CBA-2011-04-16 (Central Banking)
- NEP-EEC-2011-04-16 (European Economics)
- NEP-FDG-2011-04-16 (Financial Development & Growth)
- NEP-MAC-2011-04-16 (Macroeconomics)
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- Roberto Tamborini, 2012. "Market opinions, fundamentals and the euro-sovereign debt crisis," Department of Economics Working Papers 1210, Department of Economics, University of Trento, Italia.
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