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The Hidden Structural Features of the Fiscal Rule: A European Saga

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  • Thierry Warin

Abstract

This paper addresses the question of the reform of the Stability and Growth Pact (SGP). More and more authors and policymakers are bringing to light the negative impacts of the European deficit rule on the countries and their ability to respond asymmetric economic shocks, and some are asking for a redefinition of the pact. If the focus of the SGP is only fiscal, and two of the biggest countries in Europe have failed to abide by the pact since its implementation, it seems clear that the SGP needs at least a re-examination. Yet, on the contrary, if we introduce into the analytical framework the SGP’s impacts on the European Union’s structural policies, the conclusions are far different. Abolishing the SGP could hinder the presently up-to-date convergence prospective. This paper proposes a theoretical analysis of the SGP that emphasizes a new feature of the SGP: a strong incentive to structural reforms. Copyright International Atlantic Economic Society 2005

Suggested Citation

  • Thierry Warin, 2005. "The Hidden Structural Features of the Fiscal Rule: A European Saga," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 11(1), pages 29-38, February.
  • Handle: RePEc:kap:iaecre:v:11:y:2005:i:1:p:29-38:10.1007/s11294-004-7172-y
    DOI: 10.1007/s11294-004-7172-y
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    References listed on IDEAS

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    1. MATHIEU Catherine & STERDYNIAK Henri, "undated". "Reforming the Stability and Growth Pact: Breaking the Ice?," EcoMod2003 330700097, EcoMod.
    2. Vranceanu, Radu & Warin, Thierry, 2001. "EMU: Optimal Fiscal Strategy and the Punishment Effectiveness," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 494-504, August.
    3. Beetsma, Roel M W J & Bovenberg, A Lans, 2001. "The Optimality of a Monetary Union without a Fiscal Union," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 179-204, May.
    4. repec:spo:wpecon:info:hdl:2441/1933 is not listed on IDEAS
    5. Andersen, Torben M. & Sorensen, Jan Rose, 1995. "Unemployment and fiscal policy in an economic and monetary union," European Journal of Political Economy, Elsevier, vol. 11(1), pages 27-43, March.
    6. Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, vol. 109(458), pages 546-571, October.
    7. Anton Muscatelli & Piergiovanna Natale & Patrizio Tirelli, 2003. "A Simple and Flexible Alternative to the Stability and Growth Pact Deficit Ceilings. Is it at hand?," CESifo Working Paper Series 1006, CESifo Group Munich.
    8. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 65-113, April.
    9. Antonio Fat·s & Ilian Mihov, 2003. "On Constraining Fiscal Policy Discretion in EMU," Oxford Review of Economic Policy, Oxford University Press, vol. 19(1), pages 112-131.
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    Cited by:

    1. Moshi Optat Herman & Kirsten Wandschneider & Thierry Warin & Phanindra Wunnava, 2011. "Southern African Economic Integration: Evidence from an Augmented Gravity Model," The African Finance Journal, Africagrowth Institute, vol. 13(1), pages 1-13.
    2. Marko Malovic & Malisa Djukic & Srdjan Redzepagic, 2011. "Maastricht Criteria at the Age of 18: Are They Converging, Which Party and to What End?," Book Chapters, Institute of Economic Sciences.

    More about this item

    Keywords

    E61; E62; E63; F02; F42;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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