Implementing the Stability and Growth Pact: Enforcement and Procedural Flexibility

Author/Editor:

Roel M. W. J. Beetsma ; Xavier Debrun

Publication Date:

March 1, 2005

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper analyzes some key policy trade-offs involved in the implementation of the Stability and Growth Pact. Greater "procedural" flexibility in the Pact's implementation may improve welfare. Procedural flexibility designates the enforcer's room to apply judgment on underlying policies and to set a consolidation path that does not discourage high-quality measures. Budgetary opaqueness may hinder the qualitative assessment of fiscal policy; therefore, better monitoring and greater transparency would increase the benefits from procedural flexibility. Overall, a simple deficit rule with conditional procedural flexibility can contain excessive deficits, lower unproductive spending, and increase high-quality outlays.

Series:

Working Paper No. 2005/059

Subject:

Expenditure Fiscal governance Fiscal policy National accounts Structural reforms

English

Publication Date:

March 1, 2005

ISBN/ISSN:

9781451860788/1018-5941

Stock No:

WPIEA2005059

Pages:

34

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