The Stability and Growth Pact (SGP) aims at reducing the deficit bias and inducing fiscal policy co-ordination in EMU. This article shows that, under positive (demand or supply) shocks, average deficits and interest rates with fiscal co-ordination can be higher than without co-ordination, thus...

We analyse the effectiveness of fiscal policy rules for business cycle stabilisation in a monetary union using a quarterly macro-econometric model of Germany. The simulations compare a deficit target and an expenditure target under a range of supply, demand and fiscal shocks. Their effects are...

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...