Improving the SGP Through a Proper Accounting of Public Investment
The Stability and Growth Pact (SGP) contains a serious error: the way governments are expected to account for public investment. Correcting this error and applying, as article 104.3 of the EU Treaty allows, the current rules of the Pact to a measure of the budget where the treatment of investment expenditures is done properly would, over time, drive the debt-GDP ratio to the ratio of public capital to GDP. Excluding net public investment from the definition of the budget that is relevant for the Pact would also help in the short run, by inducing countries to shift the composition of domestic demand, rather than to reduce its level.
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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.:
- James Poterba, 1992.
"Capital Budgets, Borrowing Rules, and State Capital Spending,"
NBER Working Papers
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"Revisiting the stability and growth pact: grand design or internal adjustment?,"
Seminarios y Conferencias
6567, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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- James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1.
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