Economics at your fingertips  

The European Stability Pact and the Effect of Uncertainty on the Debt and Deficit Ratios

Jonathan Rubin
Additional contact information
Jonathan Rubin: Institute of Economics, University of Copenhagen

No 96-25, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: Proposed regulations aimed at promoting fiscal discipline among states participating in the Economic and Monetary Union (EMU) employ dept-to-GDP and deficit-to-GDP ratios as criteria for fiscal performance. Countries participating in EMU are expected to maintain these criteria or be subject to pecuniary sanctions. To provide a framework for an economic analysis of this proposed "stability and growth pact", this paper examines the dynamics of these interdependent ratios. The model demonstrates that the time path for the debt/GDP ratio is highly sensitive to the assumptions made about economic growth and the evolution of the debt/GDP ratio differs markedly from that predicted by a deterministic model. We quantify the effect of stochastic variability and its implications for the kind of regulations now being proposed.

Pages: 27 pages
Date: 1996-12
References: Add references at CitEc
Citations: Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics �ster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().

Page updated 2020-09-21
Handle: RePEc:kud:kuiedp:9625