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Fiscal institutions and welfare in an open economy

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  • Negrete Juan Carlos

    (Facultad de Economía y Empresa, Universidad de Murcia)

Abstract

This paper shows that, in a multi-country framework with government deficit spillovers, designing institutions that reduce the budget deficit is an optimal response from a country’s individual point of view. However, at an aggregate level this non-cooperative behavior is counterproductive. The case in which countries cooperate in the design of their fiscal institutions is also studied and compared with the former scenario. The study provides a new approach for analyzing mechanisms, such as the Stability Pact for Europe’s monetary union, recently implemented with the aim of reducing the budget deficit.

Suggested Citation

  • Negrete Juan Carlos, 2001. "Fiscal institutions and welfare in an open economy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-11, August.
    • Handle: RePEc:bpj:bejmac:v:topics.1:y:2001:i:1:n:2
    DOI: 10.2202/1534-5998.1027
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    References listed on IDEAS

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    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    2. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 13-36, National Bureau of Economic Research, Inc.
    3. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, July.
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