Ranking Fiscal Policy Rules:The Golden Rule of Public Finance vs. The Stability and Growth Pact

28 Pages Posted: 31 Oct 2005

See all articles by Jerome Creel

Jerome Creel

Observatoire Francais des Conjonctures Economiques (OFCE); ESCP Europe

Date Written: July 2003

Abstract

The purpose of this note is to compare the characteristics of the actual Stability and Growth Pact with that of a European "modified golden rule." The latter would consist in achieving in each EU country a cyclically-adjusted net-of-public-investment balance. The benchmark for comparison is the classification adopted by Kopits and Symansky (1998) on "ideal fiscal rules." This classification has been used by Buti et al. (2003) in order to demonstrate the "ideal character" of the actual Stability and Growth Pact and thus legitimise only slight modifications to the Pact. I intend to show rather, that the "modified golden rule" is a better fiscal rule than the actual Pact.

Keywords: euro area, fiscal rule, golden rule, Stability and Growth Pact

JEL Classification: E61, H30, H60, H70

Suggested Citation

Creel, Jerome, Ranking Fiscal Policy Rules:The Golden Rule of Public Finance vs. The Stability and Growth Pact (July 2003). Available at SSRN: https://ssrn.com/abstract=826285 or http://dx.doi.org/10.2139/ssrn.826285

Jerome Creel (Contact Author)

Observatoire Francais des Conjonctures Economiques (OFCE) ( email )

69 Quai d'Orsay
Paris 75007
France
+33 1 44 18 54 78 (Fax)

ESCP Europe ( email )

79, avenue de la République
Paris, 75011
France

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