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Should Fiscal Authorities Co-operate in a Monetary Union with Public Deficit Targets?

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  • MONTSERRAT FERRÉ

Abstract

The Stability and Growth Pact (SGP) aims at reducing the deficit bias and inducing fiscal policy co-ordination in EMU. This article shows that, under positive (demand or supply) shocks, average deficits and interest rates with fiscal co-ordination can be higher than without co-ordination, thus making two of the aims of the SGP incompatible. Copyright 2005 Blackwell Publishing Ltd.

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  • Montserrat Ferré, 2005. "Should Fiscal Authorities Co-operate in a Monetary Union with Public Deficit Targets?," Journal of Common Market Studies, Wiley Blackwell, vol. 43(3), pages 539-550, September.
  • Handle: RePEc:bla:jcmkts:v:43:y:2005:i:3:p:539-550
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    1. Uhlig, H.F.H.V.S., 2002. "One Money, But Many Fiscal Policies in Europe : What are the Consequences?," Discussion Paper 2002-32, Tilburg University, Center for Economic Research.
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    Cited by:

    1. Onorante, Luca & Pedregal, Diego J. & Pérez, Javier J. & Signorini, Sara, 2010. "The usefulness of infra-annual government cash budgetary data for fiscal forecasting in the euro area," Journal of Policy Modeling, Elsevier, vol. 32(1), pages 98-119, January.
    2. Ferré, Montserrat, 2012. "The effects of uncertainty about countries’ compliance with the Stability and Growth Pact," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 660-674.
    3. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.

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