When Keynes Goes to Brussels: A New Fiscal Rule for the EMU?

Francesco Saraceno

Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, 2017, vol. 51, issue 2, 131-157

Abstract: The Economic and Monetary Union (EMU) institutions are consistent with a New Consensus that emerged in the 1980s, limiting the role for macroeconomic policy to short term stabilizations by means of rules. I will argue that the policy inertia induced by the Consensus may have played a role in the disappointing performance of EMU economies even before the crisis. The crisis of the Consensus, and the debate on secular stagnation, proved that Keynesian and possibly persistent excesses of savings over investment may hamper growth. This has put fiscal policy back to the center of the scene, and given the General Theory, at eighty, a second youth. I will argue therefore that the EMU fiscal rule should be amended to allow semi-permanent negative government savings. I will finally argue that a modified Golden Rule may serve this objective, and allow EU-wide policy coordination. This seems the only reasonable reform with some chances of being adopted by the EU divided policy makers.

Keywords: Fiscal Rules; Fiscal Policy; EMU; Golden Rule; Secular Stagnation; Keynes; Policy Mix (search for similar items in EconPapers)
JEL-codes: B22 E02 E62 E65 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.annalsfondazioneluigieinaudi.it/images ... _E-3817-Saraceno.pdf (application/pdf)

Related works:
Working Paper: When Keynes goes to Brussels: a New Fiscal Rule for the EMU ? (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fle:journl:v:51:y:2017:i:2:p:131-157

DOI: 10.26331/1019

Access Statistics for this article

Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science is currently edited by Francesco Cassata, Mario Aldo Cedrini, Roberto Marchionatti, Federica Morelli and Angela Ambrosino

More articles in Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science from Fondazione Luigi Einaudi, Torino (Italy) Contact information at EDIRC.
Bibliographic data for series maintained by Mario Aldo Cedrini ().