Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18753
Authors: 
Lindbeck, Assar
Niepelt, Dirk
Year of Publication: 
2005
Series/Report no.: 
CESifo Working Paper 1389
Abstract: 
We analyze motivations for, and possible alternatives to, the Stability and Growth Pact (SGP). With regard to the former, we identify domestic policy failures and various cross-country spillover effects; with regard to the latter, we contrast an ?economic-theory" perspective on optimal corrective measures with the ?legalistic" perspective adopted in the SGP. We discuss the advantages of replacing the Pact's rigid rules backed by fines with corrective taxes (as far as spillover effects are concerned) and procedural rules and limited delegation of fiscal powers (as far as domestic policy failures are concerned). This would not only enhance the efficiency of the Pact, but also render it easier to enforce.
Subjects: 
Stability and Growth Pact
spillover effects
policy failures
Pigouvian taxes
policy delegation
JEL: 
E63
H60
F42
F33
Document Type: 
Working Paper

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