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The Use of Fiscal Policy in EMU: First Appraisal and Future Prospects

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  • Sébastien Pommier

    (Universidad de Castilla-La Mancha)

Abstract

The Stability and Growth Pact (SGP) in EMU urges governments to achieve a position close to balance or surplus over the medium term. So far, the fiscal framework has successfully contributed to the EMU public financial sustainability and may have contributed to financial stability, as well as to a lower level of inflation. However, empirical studies also argue that the SGP may have entailed a pro-cyclical bias in the evolution of fiscal policy, namely that governments have cushioned the role of automatic stabilizers to respect the established limits of the deficit. The SGP is in the spotlight of criticism and several reforms have been proposed.

Suggested Citation

  • Sébastien Pommier, 2008. "The Use of Fiscal Policy in EMU: First Appraisal and Future Prospects," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 69(03), pages 28-45.
    • Handle: RePEc:ekz:ekonoz:2008304
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    More about this item

    Keywords

    fiscal policy; Economic and Monetary Union; Stability and Growth Pact; automatic stabilizers;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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