Aspects of economic governance in the Euro area: restoring internal and external balances

Nicos Christodoulakis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The Economic Governance for the Euro Area is envisaged to be both an overseeing framework that enables the timely identification of oncoming trouble, as well as a correction mechanism that puts an economy hit by major shocks back in order. The paper discusses the relevance of prevention and correction mechanisms, and finds that exclusively focusing fiscal policy on debt sustainability may be misleading for all and more harmful to the weaker economies in particular, unless internal and external imbalances are taken into account. The fiscal rule should be designed so as to be compatible with debt sustainability in the medium run but also allowed to respond to short term output and current account fluctuations. The micro-management of fiscal components with regards to political feasibility and social equity is also discussed.

Keywords: euro area; public debt; fiscal policy; external balance (search for similar items in EconPapers)
JEL-codes: E63 F15 H63 (search for similar items in EconPapers)
Date: 2016-12-03
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

Published in Politica Economica, 3, December, 2016, 32(3), pp. 489-510. ISSN: 1120-9496

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http://eprints.lse.ac.uk/69169/ Open access version. (application/pdf)

Related works:
Journal Article: Aspects of Economic Governance in the Euro Area: Restoring Internal and External Balances (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:69169

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