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A dynamic rule applied to the threshold imposed on the European budgetary deficits

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  • Menguy, Séverine

Abstract

Up until now, European fiscal discipline has been essentially assessed on the basis of the deficit rather than on the debt situations of EU countries. However, the sustainability of the public debt depends on the discrepancy between the interest rate and the growth rate of any given country. As these future economic variables are difficult to anticipate, however, the present paper proposes a more applicable rule for the deficits. Unlike what is stated in the Stability and Growth Pact, the budgetary deficits in the European Union may therefore be kept at higher levels as a country maintains a high inflation or real growth rate, and a low level of public indebtedness.

Suggested Citation

  • Menguy, Séverine, 2008. "A dynamic rule applied to the threshold imposed on the European budgetary deficits," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1093-1105.
  • Handle: RePEc:eee:jpolmo:v:30:y:2008:i:6:p:1093-1105
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    References listed on IDEAS

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    Cited by:

    1. Garcia, Carlos J. & Restrepo, Jorge E. & Tanner, Evan, 2011. "Fiscal rules in a volatile world: A welfare-based approach," Journal of Policy Modeling, Elsevier, vol. 33(4), pages 649-676, July.
    2. Hauptmeier, Sebastian & Sanchez-Fuentes, A. Jesus & Schuknecht, Ludger, 2011. "Towards expenditure rules and fiscal sanity in the euro area," Journal of Policy Modeling, Elsevier, vol. 33(4), pages 597-617, July.
    3. Sebastian Hauptmeier & A. Jesús Sánchez Fuentes & Ludger Schuknecht, 2015. "Spending Dynamics in Euro Area Countries: Composition and Determinants," Hacienda Pública Española, IEF, vol. 215(4), pages 119-138, December.
    4. Marianna Sávai, 2016. "Short-term Fiscal Sustainability of V4 Countries," European Financial and Accounting Journal, University of Economics, Prague, vol. 2016(3), pages 169-182.
    5. Berrittella, Maria & Zhang, Jian, 2015. "Fiscal sustainability in the EU: From the short-term risk to the long-term challenge," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 261-280.

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