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

Does Stability and Growth Pact Provide an Adequate and Consistent Fiscal Rule?

  • Mauro Visaggio

    (Università di Perugia)

This paper examines the adequacy and the consistency of the fiscal rule set by the Treaty of Maastricht and the Stability and Growth Pact. First, it shows that the functional fiscal rule is adequate in ensuring the final goal of public debt sustainability. Second, it points out that the draw of an arbitrary numerical value is indifferent to reach the final goal even if produces different intergenerational distribution of public debt burden. Finally, it shows that the updated numerical fiscal rule of Stability and Growth Pact removes the inconsistency of the previous numerical fiscal rule – arising for a given set of value of GDP – embodied in the Treaty of Maastricht but at the same time it implies that in the long period public debt has to be retired entirely and consequently imposes a heavy burden on generations living at the time of fiscal adjustment.

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://128.118.178.162/eps/mac/papers/0407/0407008.pdf
Download Restriction: no

Paper provided by EconWPA in its series Macroeconomics with number 0407008.

as
in new window

Length: 32 pages
Date of creation: 06 Jul 2004
Date of revision:
Handle: RePEc:wpa:wuwpma:0407008
Note: Type of Document - pdf; pages: 32
Contact details of provider: Web page: http://128.118.178.162

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. Marco Buti & Gabriele Giudice, 2002. "Maastricht's Fiscal Rules at Ten: An Assessment," Journal of Common Market Studies, Wiley Blackwell, vol. 40(5), pages 823-848, December.
  2. Assaf Razin & Efraim Sadka, 2003. "Privatizing Social Security Under Balanced-Budget Constraints: A Political-Economy Approach," CESifo Working Paper Series 1039, CESifo Group Munich.
  3. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
  4. Marco Buti & Sylvester Eijffinger & Daniele Franco, 2003. "Revisiting the Stability and Growth Pact: grand design or internal adjustment?," European Economy - Economic Papers 180, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  5. Buiter, Willem H. & Grafe, Clemens, 2002. "Patching up the Pact: some Suggestions for Enhancing Fiscal Sustainability and Macroeconomic Stability in an Enlarged European Union," CEPR Discussion Papers 3496, C.E.P.R. Discussion Papers.
  6. Matthew Canzoneri & Behzad Diba, 1999. "The Stability and Growth Pact: A Delicate Balance or an Albatross?," Empirica, Springer, vol. 26(3), pages 241-258, September.
  7. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
  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, 04.
  9. Harck, Soren, 2000. "On the Sustainability Area as a Simplifying Didactic Device," Cambridge Journal of Economics, Oxford University Press, vol. 24(4), pages 505-09, July.
  10. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
  11. Brunila, Anne & Buti, Marco & in't Veld , Jan, 2002. "Cyclical stabilisation under the Stability and Growth Pact: How effective are automatic stabilisers?," Research Discussion Papers 6/2002, Bank of Finland.
  12. Willem H. Buiter, 2003. "Ten Commandments for a Fiscal Rule in the E(M)U," Oxford Review of Economic Policy, Oxford University Press, vol. 19(1), pages 84-99.
  13. McCallum, Bennett T, 1984. "Are Bond-Financed Deficits Inflationary? A Ricardian Analysis," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 123-35, February.
  14. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  15. Matthew B. Canzoneri & Robert E. Cumby & Behzad T. Diba, 1998. "Is the Price Level Determined by the Needs of Fiscal Solvency?," NBER Working Papers 6471, National Bureau of Economic Research, Inc.
  16. 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.
  17. Michael J. Artis & Marco Buti, 2000. "Close to Balance or in Surplus. A Policy Maker’s Guide to the Implementation of the Stability and Growth Pact," EUI-RSCAS Working Papers 28, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  18. Matthew B. Canzoneri & Robert E. Cumby & Behzad T. Diba, 2002. "Should the European Central Bank and the Federal Reserve be concerned about fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 333-389.
  19. Anne Brunila & Marco Buti & Jan in 't Veld, 2002. "Fiscal policy in Europe: how effective are automatic stabilisers?," European Economy - Economic Papers 177, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  20. George Kopits, 2001. "Fiscal Rules; Useful Policy Framework or Unnecessary Ornament?," IMF Working Papers 01/145, International Monetary Fund.
  21. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer.
  22. Canzoneri, Matthew B & Cumby, Robert & Diba, Behzad, 1998. "Fiscal Discipline and Exchange Rate Regimes," CEPR Discussion Papers 1899, C.E.P.R. Discussion Papers.
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:wpa:wuwpma:0407008. 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: (EconWPA)

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.