IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Public investment, the Stability Pact and the ‘golden rule’

  • Fabrizio Balassone
  • Daniele Franco

The fiscal rules set in the Treaty of Maastricht and in the Stability and Growth Pact have sometimes been criticised as an excessively binding constraint for appropriate counter-cyclical action. The risk that the rules may permanently reduce the public sector’s contribution to capital accumulation has also been pointed out. In this framework, the adoption of a ‘golden rule’ has been suggested. Starting from the recent debate, this paper tackles two questions: (a) the implications of the Pact for public investment and (b) the pros and cons of introducing a golden rule in EMU’s fiscal framework, given the objectives of low public debts and adequate margins for a stabilising budgetary policy. The analysis suggests that the rules set in the Treaty and in the Pact may negatively influence public investment spending. However, the golden rule, although intuitively appealing, does not seem to be an appropriate solution to the problem.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ifs.org.uk/fs/articles/0023a.pdf
Download Restriction: no

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 21 (2000)
Issue (Month): 2 (June)
Pages: 207-229

as
in new window

Handle: RePEc:ifs:fistud:v:21:y:2000:i:2:p:207-229
Contact details of provider: Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE
Phone: (+44) 020 7291 4800
Fax: (+44) 020 7323 4780
Web page: http://www.ifs.org.ukEmail:


More information through EDIRC

Order Information: Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  2. Giavazzi, Francesco & Pagano, Marco, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," CEPR Discussion Papers 1284, C.E.P.R. Discussion Papers.
  3. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  4. M. Buti & D. Franco & H. Ongena, 1997. "Budgetary Policies during Recessions - Retrospective Application of the "Stability and Growth Pact" to the Post-War Period," European Economy - Economic Papers 121, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  5. Dalamagas, Basil, 1995. "Growth, Public Investment and Deficit Financing," Australian Economic Papers, Wiley Blackwell, vol. 34(65), pages 244-62, December.
  6. Evans, Paul & Karras, Georgios, 1994. "Is government capital productive? Evidence from a panel of seven countries," Journal of Macroeconomics, Elsevier, vol. 16(2), pages 271-279.
  7. Garcia-Mila, Teresa & McGuire, Therese J & Porter, Robert H, 1996. "The Effect of Public Capital in State-Level Production Functions Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 177-80, February.
  8. Bertola, G. & Drazen, A., 1991. "Trigger Pointsand Budget Cuts ; Explaining the Effects of Fiscal Austerity," Papers 26-91, Tel Aviv.
  9. Nouriel Roubini & Jeffrey Sachs, 1989. "Government Spending and Budget Deficits in the Industrial Economies," NBER Working Papers 2919, National Bureau of Economic Research, Inc.
  10. Artis, Michael J & Winkler, Bernhard, 1997. "The Stability Pact: Safeguarding the Credibility of the European Central Bank," CEPR Discussion Papers 1688, C.E.P.R. Discussion Papers.
  11. James Poterba, 1992. "Capital Budgets, Borrowing Rules, and State Capital Spending," NBER Working Papers 4235, National Bureau of Economic Research, Inc.
  12. Ratner, Jonathan B., 1983. "Government capital and the production function for U.S. private output," Economics Letters, Elsevier, vol. 13(2-3), pages 213-217.
  13. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions be Expansionary? Tales of Two Small European Countries," NBER Working Papers 3372, National Bureau of Economic Research, Inc.
  14. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
  15. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
  16. Robert Holzmann, 1997. "Fiscal Alternatives of Moving from Unfunded to Funded Pensions," OECD Development Centre Working Papers 126, OECD Publishing.
  17. Randall W. Eberts, 1990. "Public infrastructure and regional economic development," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 15-27.
  18. Douglas R. Dalenberg & Mark D. Partridge & Dan S. Rickman, 1998. "Public Infrastructure: Pork or Jobs Creator?," Public Finance Review, , vol. 26(1), pages 24-52, January.
  19. Balassone Fabrizio & Monacelli Daniela, 1999. "Politiche di stabilizzazione: quali margini nelle regole fiscali della UE?," Politica economica, Società editrice il Mulino, issue 3, pages 309-328.
  20. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 65-113, 04.
  21. Jakob Haan & Jan Sturm & Bernd Sikken, 1996. "Government capital formation: Explaining the decline," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 132(1), pages 55-74, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ifs:fistud:v:21:y:2000:i:2:p:207-229. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephanie Seavers)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.