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The Stability and Growth Pact Time to Rebuild!

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  • Bofinger, Peter
  • Mayer, Eric

Abstract

Within this paper we specify a symmetric two country model for the euro area to evaluate monetary and fiscal policy interaction with decentralized fiscal authorities. Obviously this calls for rules which neatly balance the chances and perils. Thereby we show that stringent rules are a prequisitive for a harmonious functioning of a monetary union. Nevertheless given the ability of fiscal policy to effectively stabilize the economic cycle we show that the current rules in reign are of little use. We close the paper by making some suggestions along which the Stability and Growth Pact might be reformed.

Suggested Citation

  • Bofinger, Peter & Mayer, Eric, 2004. "The Stability and Growth Pact Time to Rebuild!," W.E.P. - Würzburg Economic Papers 56, University of Würzburg, Department of Economics.
    • Handle: RePEc:zbw:wuewep:56
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    File URL: https://www.econstor.eu/bitstream/10419/22350/1/wep56.pdf
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    References listed on IDEAS

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    Cited by:

    1. Paolo Biraschi, "undated". "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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    More about this item

    Keywords

    Economic and Monetary Union; Fiscal Policy; Fiscal Rules; Stability and Growth Pact;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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