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Does Stability and Growth Pact Provide an Adequate and Consistent Fiscal Rule?

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  • Mauro Visaggio

    (Università di Perugia)

Abstract

This paper examines the adequacy and the consistency of the fiscal rule set by the Treaty of Maastricht and the Stability and Growth Pact. First, it shows that the functional fiscal rule is adequate in ensuring the final goal of public debt sustainability. Second, it points out that the draw of an arbitrary numerical value is indifferent to reach the final goal even if produces different intergenerational distribution of public debt burden. Finally, it shows that the updated numerical fiscal rule of Stability and Growth Pact removes the inconsistency of the previous numerical fiscal rule – arising for a given set of value of GDP – embodied in the Treaty of Maastricht but at the same time it implies that in the long period public debt has to be retired entirely and consequently imposes a heavy burden on generations living at the time of fiscal adjustment.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0407008.

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Length: 32 pages
Date of creation: 06 Jul 2004
Date of revision:
Handle: RePEc:wpa:wuwpma:0407008

Note: Type of Document - pdf; pages: 32
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  22. Buiter, Willem H & Grafe, Clemens, 2002. "Patching up the Pact: some Suggestions for Enhancing Fiscal Sustainability and Macroeconomic Stability in an Enlarged European Union," CEPR Discussion Papers 3496, C.E.P.R. Discussion Papers.
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Cited by:
  1. Francesco Venturini, 2011. "Product variety, product quality, and evidence of Schumpeterian endogenous growth: a note," Quaderni del Dipartimento di Economia, Finanza e Statistica 93/2011, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  2. Paolo Biraschi, . "Searching for the optimal EMU fiscal rule:an ex-post analysis of the SGP reform proposals," Working Papers wp2008-7, Department of the Treasury, Ministry of the Economy and of Finance.

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