One of the most often discussed features of the Stability and Growth Pact is the rigidity of its 3% deficit rule. In the recent time several reform proposals aim at alleviating the rule in order to allow more room for the automatic stabilizers to operate. As the 3% limit became in the recent...

Paper examines the problem of choice of an optimal fiscal rule in the long run. An ideal rule would typically assure fair distribution of utility over generations, while allowing to maintain the sustainable fiscal position. Three commonly used types: debt, deficit and expenditure rules are...