Excessive Deficits: Sense and Nonsense in the Treaty of Maastricht

Buiter, Willem H.; Corsetti, Giancarlo; Roubini, Nouriel

doi:10.2307/1344568

Cited by 354 publications

(164 citation statements)

References 25 publications

Supporting

Mentioning

158

Contrasting

Unclassified

Order By: Relevance

“…Opponents argue that fiscal rules limit the ability of the government to stabilize the economy and thus foster procyclicality. This idea goes back to the criticism of the European Stability and Growth Pact (see Buiter et al, 1993). Poterba (1994), Alt and Lowry (1994), and Roubini and Sachs (1989) document how fiscal constraints inhibit the reaction of policy to unexpected shocks.…”

Section: The Case For a Structural Balance Targetmentioning

confidence: 99%

Targeting the Structural Balance

Manasse¹,

Panizza

Reis

2007

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. This paper may be freely reproduced provided credit is given to the Research Department, InterAmerican Development Bank. Terms of use: Documents inThe Research Department (RES) produces a quarterly newsletter, IDEA (Ideas for Development in the Americas), as well as working papers and books on diverse economic issues. To obtain a complete list of RES publications, and read or download them please visit our web site at: http://www.iadb.org/res. 3Abstract * This paper discusses whether a country should conduct fiscal policy by targeting a structural (or cyclically adjusted) fiscal balance. The paper is divided into three sections. The first section discusses the concept of cyclically adjusted balance (CAB) and points out practical and conceptual problems related to the interpretation and the measurement of a CAB. The second section discusses the theoretical rationale for having a fiscal rule in general and a rule defined in terms of a cyclically adjusted balance in particular. The third section discusses conceptual and practical problems with adopting fiscal rules and rules that target the structural balance.

show abstract

Section: The Case For a Structural Balance Targetmentioning

confidence: 99%

Targeting the Structural Balance

Manasse¹,

Panizza

Reis

2007

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…I call this the "SGP hypothesis" since it figures prominently among the arguments in favour of binding fiscal rules for national FAs (see e.g. Buiter et al (1993), EichengreenWyplosz (1998), Artis-Winkler (1999)). On the one hand, the argument runs, each government has an incentive to seize the domestic positive effects of budget deficits.…”

Section: The Anatomy Of Fiscal Spilloversmentioning

confidence: 99%

One ‘Monetary Giant’ with Many ‘Fiscal Dwarfs’: The Efficiency of Macroeconomic Stabilization Policies in the European Monetary Union

Tamborini

2004

The Past, Present and Future of the European Union

View full text Add to dashboard Cite

One of the key problems in the design of a currency union is macroeconomic stabilization. Assuming that all policy-makers in the European Monetary Union are "disciplined" according to the rules set by the Maastricht Treaty and the Stability and Growth Pact, this paper addresses the question of whether member countries will effectively be sheltered against undesirable macroeconomic fluctuations. The analytical thrust of the paper is that having disciplined policy-makers does not exhaust the problem of policy design. Stabilization in the EMU may be pursued by means of centralized monetary policy as well as by means of national fiscal policies. Hence, the TinbergenMeade problem of efficient choice and assignment of stabilization instruments arises, a problem that has hitherto been disregarded. The main conclusion is that the now popular idea that the European Central Bank will cope with union-wide shocks while national governments will stabilize domestic shocks is not always the most efficient assignment choice, and it is inconsistent with the imposition of a fiscal deficit ceiling on member countries.

show abstract

“…The presence of free-rider problems in a monetary union -in which member state borrow in a common currency -has been widely discussed in the literature (Buiter et al [1993], Beetsma and Uhlig [1999], von Hagen and Eichengreen [1996], Lane [2012]). The attempt to overcome it by inserting an explicit 'no-bail-out clause' in the Maastricth Treaty (art.…”

mentioning

confidence: 99%

Potential Output and Fiscal Rules in a Monetary Union Under Asymmetric Information 2nd Ed

Marattin¹,

Meraglia²

2016

SSRN Journal

View full text Add to dashboard Cite

We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information on member states' potential output and (ii) bail-out among member states. The first-best deficit is contingent on the cycle, that is, on member states' output gap. In the presence of asymmetric information and bailout, the first-best deficit is not implementable. Bail-out lowers the scope for signalling (discrimination) by member states (lenders) and induces overborrowing by member states characterized by a low output gap. The Monetary Union can design a mechanism such that a member state with a smaller negative output gap runs an optimal budget deficit upon receiving a transfer form the Union. We show that, this 'cyclically-contingent' fiscal framework Pareto dominates the 'cyclically-adjusted ' fiscal rule currently enforced by the European Monetary Union. Our model can then account for a situation where both asymmetric information over cyclical positions and the presence of bail-out among member states does not induce borrowing distortions.

show abstract

Excessive Deficits: Sense and Nonsense in the Treaty of Maastricht

Cited by 354 publications

References 25 publications

Targeting the Structural Balance

Targeting the Structural Balance

One ‘Monetary Giant’ with Many ‘Fiscal Dwarfs’: The Efficiency of Macroeconomic Stabilization Policies in the European Monetary Union

Potential Output and Fiscal Rules in a Monetary Union Under Asymmetric Information 2nd Ed

Contact Info

Product

Resources

About