This paper examines the adequacy and the consistency of the fiscal rule set by the Treaty of Maastricht and the Stability and Growth Pact. First, it shows that the functional fiscal rule is adequate in ensuring the final goal of public debt sustainability. Second, it points out that the draw of...

The paper presents a simple model for discussing the effects of deficit limits and budget rules on fiscal policy. I find that limits on deficit- output ratios provide incentives to implement procyclical policies when the economy is in intermediate states, and countercyclical policies only in...

The Broad Economic Policy Guidelines contain the answers of the European Commission and the governments of the EU-member countries to the European growth and employment problems. These guidelines have been the major EU-economic policy concept for around ten years now. They can be seen as a...

Liquidity traps occur when the natural nominal interest rate becomes negative. In a model with capital price dynamics explicitly considered, we find that shocks in the future can cause current and lasting liquidity traps. We propose that the central bank can prevent or fix liquidity traps by...

A vast array of information about economic activity, political behavior and social trends are summarized in quantitative measures, sometimes in a single number such as GDP. Because of their apparent objectivity, simplicity and universality, these measures are used as a basis for both scientific...

This paper generalizes the classical theory of economic policy developed by Tinbergen and Theil to a static LQ-strategic context between n players. We show how this generalized version of controllability can profitably be used to deal with policy ineffectiveness issues and Nash equilibrium...

This paper extends the stabilization game between monetary and fiscal authorities to the case of multiplicative (model) uncertainty. In this context, the “symbiosis assumption”, i.e. fiscal and monetary policy share the same ideal targets, no longer guarantees the achievement of ideal output...

This paper introduces a general objective function for monetary policy that abandons certainty equivalence and features 'prudence'. It provides an alternative explanation for the positive relation between the level and variability of inflation, both across countries and over time. In particular,...

This paper traces the euro zone’s inadequate macroeconomic performance in recent years back to the predominance of a restrictive macroeconomic policy mix based on a ‘new monetarist’ approach to economic policy. An approach based on a (post-)Keynesian analysis is presented as a growth and...

In this paper we study the implications of the unemployment insurance (UI) financing system on wage levels and employment when labour markets are unionised and the revenues of the firms are stochastic. We use the basic monopoly union approach of wage and employment determination and assume that...