Monetary unions under financial shocks: do fiscal rules matter?
- Autores: María del Carmen Díaz Roldán, Alberto Montero Soler
- Localización: XX Encuentro Economía Pública: estado del bienestar. Sostenibilidad y reformas, 2013, ISBN 978-84-695-6945-0, pág. 42
- Idioma: inglés
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Resumen
The recent problems generated by the e cono mic and financial crisis have led to some debate on the role of economic polic i es. The question is to which extent a specific monetary policy regime would impose a restriction to policymakers. In particular , the cost of losing independence in the use of th e exchange rate and monetary policy, and the restrictions derived from the fiscal discipline required for supporting monetary agreements.
As an example we can think on the expected success of the European Economic and Monetary Union (EMU) , related to the b enefits of the single currency, the higher degree of integration of financial markets, and also to the sound public finances guaranteed by the set of fiscal rules provided by EMU. When signing the Stability and Growth Pact (SGP), Member States committed th emselves to reach a medium - term budgetary posit ion close to balance. T he Maastricht Treaty stresses as basic that the Member States of the EMU should avoid excessive deficits, and the reference values for defici t - to - GDP and debt - to - GDP ratios have worked i n fact as an explicit fiscal rule.
But, in practice, the policy orientation of the SGP has not been fully satisfied. This has opened a debate about the utility and effectiveness of fiscal rules in EMU, and on their complementarities with discretionary fisc al policy measures and automatic stabilisers to deal with short - run fluctuations.
The aim of this paper is to investigate how to deal with monetary (financial) shocks in a monetary union following fiscal rules . In particular, we will analyse the interactio n among those members showing a relatively high level of public debt and those that seem to follow a more strict fiscal discipline
