Hostname: page-component-78c5997874-dh8gc Total loading time: 0 Render date: 2024-11-15T08:24:56.886Z Has data issue: false hasContentIssue false
  • English
  • Français

Fiscal Solvency in Europe: Budget Deficits and Government Debt under European Monetary Union

Published online by Cambridge University Press:  26 March 2020

Guglielmo Maria Caporale
Get access Rights & Permissions [Opens in a new window]

Extract

The debate on European monetary union has brought the issue of European fiscal policy into public scrutiny. This note discusses the problems of fiscal policy coordination in Europe over the next decade, and analyses the evolution of debt and deficits over the 1970s and 1980s. We then look more formally at the concept of a sustainable path for public debt and report on some tests that investigate whether or not debt paths in Europe have been on a stable trajectory. The note by Barrell and In't Veld in this Review considers the importance of fiscal solvency in constructing large scale macro models, and casts further light on the issues discussed here.

Type
Articles
Information
National Institute Economic Review , Volume 140 , May 1992 , pp. 69 - 77
Copyright
Copyright © 1992 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

∗

I am grateful to Ray Barrell, Andrew Britton, David Mayes, Nigel Pain, Peter Westaway and Garry Young for useful comments and discussions. I would also like to thank the other members of the macroeconomic team at the National Institute for helpful suggestions.

References

Anderton, R., Barrell, R. and in't Veld JW (1991), ‘Macroeconomic convergence in Europe’, National Institute Economic Review, no.138, November.CrossRefGoogle Scholar
Bayoumi, T. and Masson, PR (1992), ‘Fiscal flows in the United States and Canada: lessons for Monetary Union in Europe’, paper presented at the SPES Conference on ‘Macroeconomic Policy Coordination in Europe: the ERM and Monetary Union’, Warwick University, March 1992.Google Scholar
Blanchard, OJ (1990), ‘Suggestions for a new set of fiscal indicators’, OECD/DES Working Paper no.79.Google Scholar
Buiter, WH and Patel, UR (1992), ‘Debt, deficits, and inflation: an application to the public finances of India’, Journal of Public Economics, 47, 171–205.CrossRefGoogle Scholar
Canzoneri, MB and Diba, BT (1991), ‘Fiscal deficits, financial integration and a Central Bank for Europe’, Journal of the Japanese and International Economies, 5, 381–403.CrossRefGoogle Scholar
Caporale, GM (1992), ‘Debt sustainability and monetary union’, National Institute of Economic and Social Research, mimeo.Google Scholar
Commission of the European Communities (1990), ‘One market, one money: an evaluation of the potential benefits and costs of forming an economic and monetary union’, European Economy, 44, October.Google Scholar
Commission of the European Communities (1991), ‘Budgetary policies in the Community: developments and perspectives with a view to fiscal discipline’, European Economy, 50, 161–176.Google Scholar
Currie, D. and Levine, P. (1991), ‘The solvency constraint and fiscal policy in an open economy’, in ‘External constraints on macroeconomic policy. The European experience’, G Alogoskoufis, L Papademos and R Portes eds., Cambridge University Press, Cambridge.Google Scholar
Delors, J. et al (1989), ‘Report on Economic and Monetary Union in the European Community’, Committee for the Study of Economic and Monetary Union.Google Scholar
European Council of Maastricht (1991), ‘Amendments to the EEC treaty— Economic and Monetary Union’.Google Scholar
Frankel, J. and Razin, A. (1987), ‘The Mundell-Fleming model: a quarter of a century later’, IMF Staff Papers, 34, 4.CrossRefGoogle Scholar
Hamilton, JD and Flavin, MA (1986), ‘On the limitations of government borrowing: a framework for empirical testing’, American Economic Review, 76, 4, 808–819.Google Scholar
Oxley, H. and Martin, JP (1991), ‘Controlling government spending and deficits: trends in the 1980s and prospects for the 1990s’, OECD Economic Studies, no. 17.Google Scholar
Padoa-Schioppa, T. (1990), ‘Fiscal prerequisites of a European monetary union’, Conference on Aspects of Central Bank Policymaking, organized by the Bank of Israel and the David Horowitz Institute, Tel Aviv, January.Google Scholar
Phillips, Pcb and Perron, P. (1988), ‘Testing for a unit root in time series regression’, Biometrika, 75, 2, 335–346.CrossRefGoogle Scholar
Sachs, J. and Sala-i-Martin, X. (1991), ‘Fiscal policies and optimum currency areas: evidence from Europe and the United States’, Economic Growth Centre, Yale University, Discussion Paper no. 638.Google Scholar
Sargent, T. and Wallace, N. (1981), ‘Some unpleasant monetarist arithmetic’, Federal Reserve Bank of Minneapolis Quarterly Review, 5, 1–17.Google Scholar
Wilcox, DW (1989), ‘The sustainability of government deficits: implications of the present-value borrowing constraint’, Journal of Money, Credit, and Banking, 21, 3, 291–306.CrossRefGoogle Scholar