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The European Stability Pact and Feedback Policy Effects


  • Creel, Jérôme

    () (Observatoire Françis des Conjonctures Economiques)


With a two-country dynamic model in a monetary union with wealth private behaviors, we study the implications of public debt on monetary and fiscal policies. The model used has Keynesian features in the short run and Wicksellian ones in the long run. We analyse the effects of asymmetric fiscal policies in Euroland and show that such a situation creates two feedback effects which reduce the efficiency of economic policies. First, because of the inability of one government to implement an expansionary fiscal policy, the other government has to substitute for it to reach economic targets. Second, the ECB’s involvement in macroeconomic stabilisation will be exacerbated. The more substantial these effects, the more coordination is needed between European governments and the ECB.

Suggested Citation

  • Creel, Jérôme, 2002. "The European Stability Pact and Feedback Policy Effects," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 570-595.
  • Handle: RePEc:ris:integr:0209

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    References listed on IDEAS

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    Cited by:

    1. Bruck, Tilman & Zwiener, Rudolf, 2006. "Fiscal policy rules for stabilisation and growth: A simulation analysis of deficit and expenditure targets in a monetary union," Journal of Policy Modeling, Elsevier, vol. 28(4), pages 357-369, May.
    2. Jérôme Creel, 2002. "Strategic interactions between monetary and fiscal policies: a case study for the European Stability Pact," Sciences Po publications info:hdl:2441/3221, Sciences Po.
    3. repec:spo:wpecon:info:hdl:2441/2085 is not listed on IDEAS
    4. Jérôme Creel & Jacques Le Cacheux, 2006. "La nouvelle désinflation compétitive européenne," Revue de l'OFCE, Presses de Sciences-Po, vol. 98(3), pages 7-36.
    5. Bruno Ducoudre, 2008. "Structure par terme des taux d’intérêt et anticipations de la politique économique," Sciences Po publications info:hdl:2441/5221, Sciences Po.
    6. repec:spo:wpecon:info:hdl:2441/3221 is not listed on IDEAS

    More about this item


    EMU; Stability and Growth Pact; Monetary Policy; Fiscal Policy; Public Debt.;

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • 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
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt


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