Journal Article

Ten Commandments for a Fiscal Rule in the E(M)U

Willem H. Buiter

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 19, issue 1, pages 84-99
Published in print March 2003 | ISSN: 0266-903X
Published online March 2003 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/19.1.84
Ten Commandments for a Fiscal Rule in the E(M)U

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Fiscal rules in a monetary union should (1) be simple; (2) ensure the solvency of the state; (3) relate to the consolidated general government and central bank; (4) be neutral as regards the size of the public sector; (5) avoid pro‐cyclical behaviour of the fiscal policy instruments; (6) also make sense in the long run; (7) allow for important differences in economic structure and initial conditions; (8) aggregate into behaviour that makes sense at the level of the union as a whole; (9) be credible; and (10) be enforced impartially and consistently. The paper reviews the rules of the Stability and Growth Pact, the UK's golden rule and sustainable‐investment rule, and Buiter and Grafe's permanent‐balance rule from the perspective of how well they meet these ten criteria.

Journal Article.  0 words. 

Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

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