The SGP: Delicate Balance or Albatross?

Matthew Canzoneri and Behzad T. Diba

Chapter 3 in The Stability and Growth Pact, 2001, pp 53-74 from Palgrave Macmillan

Abstract: Abstract The Stability and Growth Pact tried to strike a delicate balance. On the one hand, it imposed constraints on national fiscal policy that were deemed necessary to protect the new European Central Bank (ECB) from outside pressures, especially during the period in which it tried to establish credibility.1 At the same time, the Pact allowed some flexibility for a counter-cyclical fiscal policy. This too was deemed necessary in European Monetary Union (EMU): a stable ECB policy might be expected to create stable macroeconomic conditions for the euro zone as a whole, but it could not be expected to iron out regional cyclical imbalances. Did the Pact strike a workable balance? Or is the Pact an unnecessary albatross that could seriously hamper the whole EMU project?

Keywords: Central Bank; Real Interest Rate; European Central Bank; European Monetary Union; Maastricht Treaty (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62926-4_3

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DOI: 10.1057/9780230629264_3

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