The aim of the paper is to analyse the Stability and Growth Pact of EMU in a two-country model of monetary union with rational expectations and with spillovers of macroeconomic policies between the countries. The paper concentrates on tax policy, and shows that the results on optimal policy...

The aim of our paper is to contribute to the debate on optimal fiscal rules in a monetary union: in terms of global budgetary deficit, of structural budgetary deficit, or of public debt. Indeed, these rules seem to be mixed in the framework of the European Economic and Monetary Union, with the...

A popular view among economists, policymakers, 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...