The European Stability Pact and the Effect of Uncertainty on the Debt and Deficit Ratios
Publikation: Working paper › Forskning
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The European Stability Pact and the Effect of Uncertainty on the Debt and Deficit Ratios. / Rubin, Jonathan.
Department of Economics, University of Copenhagen, 1996.Publikation: Working paper › Forskning
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TY - UNPB
T1 - The European Stability Pact and the Effect of Uncertainty on the Debt and Deficit Ratios
AU - Rubin, Jonathan
PY - 1996
Y1 - 1996
N2 - Proposed regulations aimed at promoting fiscal discipline among states participating in the Economic and Monetary Union (EMU) employ dept-to-GDP and deficit-to-GDP ratios as criteria for fiscal performance. Countries participating in EMU are expected to maintain these criteria or be subject to pecuniary sanctions. To provide a framework for an economic analysis of this proposed "stability and growth pact", this paper examines the dynamics of these interdependent ratios. The model demonstrates that the time path for the debt/GDP ratio is highly sensitive to the assumptions made about economic growth and the evolution of the debt/GDP ratio differs markedly from that predicted by a deterministic model. We quantify the effect of stochastic variability and its implications for the kind of regulations now being proposed
AB - Proposed regulations aimed at promoting fiscal discipline among states participating in the Economic and Monetary Union (EMU) employ dept-to-GDP and deficit-to-GDP ratios as criteria for fiscal performance. Countries participating in EMU are expected to maintain these criteria or be subject to pecuniary sanctions. To provide a framework for an economic analysis of this proposed "stability and growth pact", this paper examines the dynamics of these interdependent ratios. The model demonstrates that the time path for the debt/GDP ratio is highly sensitive to the assumptions made about economic growth and the evolution of the debt/GDP ratio differs markedly from that predicted by a deterministic model. We quantify the effect of stochastic variability and its implications for the kind of regulations now being proposed
M3 - Working paper
BT - The European Stability Pact and the Effect of Uncertainty on the Debt and Deficit Ratios
PB - Department of Economics, University of Copenhagen
ER -
ID: 2999911