A simple and flexible alternative to Stability and Growth Pact deficit ceilings. Is it at hand?

Vito Muscatelli, Piergiovanna Natale () and Patrizio Tirelli

European Journal of Political Economy, 2012, vol. 28, issue 1, 14-26

Abstract: We model a monetary union where fiscal discretion generates excessive debt accumulation in steady state and inefficiently delayed debt adjustment following shocks. By setting a debt target and raising the political cost of deviating from the optimal pace of debt reversal¸ institutional design induces fiscal policymakers to implement unbiased responses to shocks. This is partly achieved by increasing the transparency of the decision-making process. We therefore call for more focused supervision tasks for the European Commission and for parliamentary discussion whenever a disagreement arises between the Commission and a national government.

Keywords: Fiscal policy; Fiscal rules; Economic and monetary union; Stability and Growth Pact; Transparency (search for similar items in EconPapers)
JEL-codes: E52 E61 E63 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: A simple and flexible alternative to the Stability and Growth Pact deficit ceilings. Is it at hand? (2010)
Working Paper: A Simple and Flexible Alternative to the Stability and Growth Pact Deficit Ceilings. Is it at hand? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:28:y:2012:i:1:p:14-26

DOI: 10.1016/j.ejpoleco.2011.07.004

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