The stability pact and feedback policy effects

Jerome Creel

Working Papers from HAL

Abstract: We use a two-country dynamic model in a monetary union in which we introduce a wealth private behaviour. We study the implications of public debt on monetary and fiscal policies in the short and the long run. We analyse the effects of asymmetric fiscal policies in Euroland: the first country has fiscal room for manoeuvre whereas the second country is fettered by the Stability Pact. We show that such a situation creates two feedback effects which reduce the efficiency of economic policies. First, because of the inability of one government to implement an expansionist fiscal policy, the other government has to substitute for it in order to stabilise inflation and production. Second, the ECB's involvement in macroeconomic stabilisation will also be exacerbated. The more substantial these effects, the more co-operation is needed between European governments and the ECB.

Date: 1999-04
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01064862
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://sciencespo.hal.science/hal-01064862/document (application/pdf)

Related works:
Working Paper: The Stability Pact and Feedback Policy Effects (1999)
Working Paper: The stability pact and feedback policy effects (1999)
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:hal:wpaper:hal-01064862

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().