Reconciling Stability and Growth: Smart Pacts and Structural Reforms
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
This paper analyzes the decision of a government facing electoral uncertainty to implement structural reforms in the presence of fiscal restraints similar to the Stability and Growth Pact. The model shows that a pact may harm structural reforms, sacrificing future growth for present stability. The welfare gains brought about by a pact depend on a trade-off between the reduction in the deficit bias and the induced reduction in the amount of structural reform. A pact becomes more attractive (“smarter”) if it takes into account the fiscal impact of structural reforms, in line with a recent proposal by the European Commission.
Series:
Working Paper No. 2003/174
Subject:
Budget planning and preparation Employment protection Fiscal policy Labor Labor market reforms Macrostructural analysis Public financial management (PFM) Structural policies Structural reforms
English
Publication Date:
September 1, 2003
ISBN/ISSN:
9781451858716/1018-5941
Stock No:
WPIEA1742003
Pages:
34
Please address any questions about this title to publications@imf.org