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Fiscal policies, public deficit restraints and European stabilization

Published online by Cambridge University Press:  17 August 2016

Frédérique Bec  and
Jean-Olivier Hairault
Frédérique Bec
Affiliation:
Université de Lille II and M.A.D., Université de Paris I
Jean-Olivier Hairault
Affiliation:
Université de Lille I (CEPE) and M.A.D., Université de Paris I
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Summary

The ability of fiscal policies to smooth macroeconomic fluctuations under the constraints imposed by the Maastricht Treaty is at the heart of the current policy debate in Europe. A two-country intertemporal stochastic general equilibrium model is used in order to evaluate the efficiency of fiscal policy. First, it reveals the importance of the nature of the shocks hitting European countries : asymmetrical shocks actually strengthen the national fluctuations. Then, constraints on public deficit imposed by the Maastricht Treaty limit the ability of national governements to stabilize their économies. Furthermore, they can lead the european countries to adopt pro-cyclical budget rules.

Résumé

Résumé

L’aptitude des politiques fiscales à lisser les fluctuations macroéconomiques sous les contraintes imposées par le Traité de Maastricht est au coeur du débat politique actuel en Europe. Un modèle intertemporel stochastique à deux-pays est employé dans le but d’évaluer l’efficacité des politiques fiscales. Premièrement, il révèle l’importance de la nature des chocs frappant les pays Européens : en fait, l’asymétrie des chocs renforcent les fluctuations nationales. dès lors, les contraintes sur le déficit public imposé par le Traité de Maastricht limitent l’aptitude des governements à stabiliser leurs économies. De plus, elles peuvent amener les pays européens à adopter des règles de budget pro-cycliques.

Keywords

F41H87E32F41H87E32
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 62 , Issue 3-4 , 1996 , pp. 329 - 355
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1996 

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Footnotes

(*)

We thank A. d’Autume, C. Bruno, M. Carré, F. Collard, J.F. Jacques, F. Portier, J.M. Tallon, and especially P.Y. Hénin for helpful comments on an earlier draft. We are also indebted to the referees. We benefited by the comments of the participants to the Conference “Should we rebuilt built-in stabilisers” held in Paris, January 1996.

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