We model a monetary union where fiscal discretion generates excessive debt accumulation in steady state and inefficiently delayed debt adjustment following shocks. By setting a debt target and raising the political cost of deviating from the optimal pace of debt reversal¸ institutional design induces fiscal policymakers to implement unbiased responses to shocks. This is partly achieved by increasing the transparency of the decision-making process. We therefore call for more focused supervision tasks for the European Commission and for parliamentary discussion whenever a disagreement arises between the Commission and a national government.

Muscatelli, V., Natale, P., Tirelli, P. (2012). A simple and flexible alternative to the Stability and Growth Pact deficit ceilings. Is it at hand?. EUROPEAN JOURNAL OF POLITICAL ECONOMY, 28(1), 14-26 [10.1016/j.ejpoleco.2011.07.004].

A simple and flexible alternative to the Stability and Growth Pact deficit ceilings. Is it at hand?

NATALE, PIERGIOVANNA;TIRELLI, PATRIZIO
2012

Abstract

We model a monetary union where fiscal discretion generates excessive debt accumulation in steady state and inefficiently delayed debt adjustment following shocks. By setting a debt target and raising the political cost of deviating from the optimal pace of debt reversal¸ institutional design induces fiscal policymakers to implement unbiased responses to shocks. This is partly achieved by increasing the transparency of the decision-making process. We therefore call for more focused supervision tasks for the European Commission and for parliamentary discussion whenever a disagreement arises between the Commission and a national government.
Articolo in rivista - Articolo scientifico
Fiscal policy; Fiscal rules; Economic and monetary union; Stability and Growth Pact; Transparency
English
2012
28
1
14
26
none
Muscatelli, V., Natale, P., Tirelli, P. (2012). A simple and flexible alternative to the Stability and Growth Pact deficit ceilings. Is it at hand?. EUROPEAN JOURNAL OF POLITICAL ECONOMY, 28(1), 14-26 [10.1016/j.ejpoleco.2011.07.004].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/48979
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