Economists, policy-makers, and the media often argue that the Maastricht Treaty and the Stability and Growth Pact make it difficult for governments of EMU countries to stabilize their economies with appropriate fiscal policy and to provide adequate public investment. Our empirical analysis...

A popular view among economists, policy-makers, and the media, is that the Maastricht Treaty and then Stability and Growth Pact have significantly impaired the ability of EU governments to conduct a stabilizing fiscal policy and to provide an adequate level of public infrastructure. In this...