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In Which Cases Can the Stability Pact be Useful?


  • Artus, P.


We build a simple theoretical model, representing two countries participating in a monetary union, to analysis the cases in which it is efficient to limit public sector deficits (to implement the Stability Pact). We introduce a link between the levels of public debt and the common interest rate, hence an external effect on deficits, from one country to the other. The divergences between the countries come either from asymmetrical shocks or from differences between the desired levels of public spending.

Suggested Citation

  • Artus, P., 1998. "In Which Cases Can the Stability Pact be Useful?," Papers 1998-24/ma, Caisse des Depots et Consignations - Cahiers de recherche.
  • Handle: RePEc:fth:cadeco:1998-24/ma

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    References listed on IDEAS

    1. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983. "Forecasting and Conditional Projection Using Realistic Prior Distributions," NBER Working Papers 1202, National Bureau of Economic Research, Inc.
    2. Bradley, Michael D & Potter, Susan M, 1986. "The State of the Federal Budget and the State of the Economy: Further Evidence," Economic Inquiry, Western Economic Association International, vol. 24(1), pages 143-153, January.
    3. Giavazzi, Francesco & Spaventa, Luigi, 1990. "The `New' EMS," CEPR Discussion Papers 369, C.E.P.R. Discussion Papers.
    4. Bernard CONNOLLY & Jurgen KRÖGER, 1993. "Economic Convergence in the Integrating Community Economy and the Role of Economic Policies," Discussion Papers (REL - Recherches Economiques de Louvain) 1993012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    5. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
    6. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
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    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


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