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The EMU Consolidation Game - or: Does 3.0 Really Mean 3.0?

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  • Heinemann, Friedrich

Abstract

Within the economic profession, it is a widely held view that the fiscal criteria of the Maastricht treaty are arbitrary numbers without economic foundation. Much of this criticism seems to overlook an important aspect - the strategic dimension of the criteria. This paper focuses on one particular question out of this broad strategic complex: How do the criteria change the fiscal bargaining situation on the national level? For this purpose, a bargaining game between a national finance minister and an interest group over budget consolidation is designed. The purpose of this paper is twofold : On the one hand the analysis should contribute to a better understanding of the strategic effects of the fiscal criteria in the pre-EMU period. On the other hand it is to provide insights helpful for the construction of credible and strategically consistent debt limits in the time after the introduction of the Euro.

Suggested Citation

  • Heinemann, Friedrich, 1998. "The EMU Consolidation Game - or: Does 3.0 Really Mean 3.0?," ZEW Discussion Papers 98-01, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:5176
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    References listed on IDEAS

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    1. Buiter, W.H. & Corsetti, G. & Roubini, N., 1992. "Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht," Papers 674, Yale - Economic Growth Center.
    2. Drudi, Francesco & Prati, Alessandro, 1993. "Signalling Debt Sustainability," CEPR Discussion Papers 787, C.E.P.R. Discussion Papers.
    3. Burton Abrams & William Dougan, 1986. "The effects of constitutional restraints on governmental spending," Public Choice, Springer, vol. 49(2), pages 101-116, January.
    4. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 13-36, National Bureau of Economic Research, Inc.
    5. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-1188, December.
    6. Joel Sobel & Ichiro Takahashi, 1983. "A Multistage Model of Bargaining," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(3), pages 411-426.
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    Cited by:

    1. Heinemann, Friedrich, 1999. "Exchange rate regimes and fiscal discipline in OECD countries," ZEW Discussion Papers 99-04, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    European Monetary Union; Convergence Criteria; Budget Consolidation; Boundary; Signalling; Conditionality;
    All these keywords.

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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