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The Use of Fiscal Policy in EMU: First Appraisal and Future Prospects

  • Sébastien Pommier

    (Universidad de Castilla-La Mancha)

The Stability and Growth Pact (SGP) in EMU urges governments to achieve a position close to balance or surplus over the medium term. So far, the fiscal framework has successfully contributed to the EMU public financial sustainability and may have contributed to financial stability, as well as to a lower level of inflation. However, empirical studies also argue that the SGP may have entailed a pro-cyclical bias in the evolution of fiscal policy, namely that governments have cushioned the role of automatic stabilizers to respect the established limits of the deficit. The SGP is in the spotlight of criticism and several reforms have been proposed.

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Article provided by Gobierno Vasco / Eusko Jaurlaritza / Basque Government in its journal EKONOMIAZ.

Volume (Year): 69 (2008)
Issue (Month): 03 ()
Pages: 28-45

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Handle: RePEc:ekz:ekonoz:2008304
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