قوانین سیاست مالی برای ثبات و رشد: یک تجزیه و تحلیل شبیه سازی از کسری بودجه و هزینه های هدف در یک اتحادیه پولی

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 evaluated by their impact on prices and output. The analysis demonstrates that in general the deficit target of the stability pact leads to less stabilisation than an expenditure target. The results suggest that the deficit rule of the stability pact should be replaced with an expenditure rule augmented by medium-term debt targets.

The paper compares the effectiveness of two fiscal policy regimes for business cycle stabilisation in a monetary union using simulation methods. This issue has become particularly important with the adoption of the stability and growth pact (SGP) in the euro zone in 1997. What had been intended to safeguard the stability of the core euro economies from time-inconsistent fiscal policies in peripheral member states has ironically become a constraint on the governments and on growth in the large euro zone economies. Most strikingly, Germany is undergoing a prolonged phase of stagnation while the German government is pursuing a pro-cyclical fiscal policy. In the German case, the SGP hence appears to reduce the effectiveness of the automatic stabilisers. We posit that fiscal consolidation using the SGP is feasible but it is achieved at a great cost in terms of foregone output growth. The main focus of the paper is the analysis of two fiscal policy rules under the SGP. Fiscal policy is defined to encompass the level and composition of government spending. Using a quarterly macro-econometric model of Germany with seasonally unadjusted national accounts data, the simulation compares a deficit target and an expenditure target under a range of macro-economic scenarios, including temporary and permanent supply, demand and fiscal shocks. The effects of these shocks are evaluated by their impact on prices and output. We thus extend the usual comparison of alternative monetary policy rules to the area of fiscal policies within a monetary union (Haber, 2001 and Taylor, 2000). The simulation analysis demonstrates that in general the deficit target of the growth and stability pact leads to less stabilisation (that is less variation of output growth) than an alternative expenditure target. The results are clear for a negative demand shock with a deficit target having pro-cyclical and the expenditure target having anti-cyclical effects. The results are more complicated for a supply shock. Here it is not so obvious whether fiscal policy should stabilise economic development. The results suggest that the stability and growth pact in its current shape should be re-interpreted. Deficit targets should be replaced with expenditure targets and complemented by medium-term debt targets. As a word of caution, we would like to state explicitly which questions the paper does and does not attempt to answer. First, we compare the effects of two obvious and relevant policy rules but we do not derive from first principles an optimal policy rule for a large, indebted euro zone economy. Second, we focus on an evaluation of two types of policy rules, not on the need for or the effectiveness of fiscal coordination itself. Third, we focus on the level and the composition of government spending, not on the taxation and revenue side of the economy. Fourth, we simulate the medium-term effects of two policy rules but we do not include in our simulation possible long-term behavioural responses of economic agents to each of these policy rules. Finally, we only simulate the effects of each policy rule for the German economy, not for the whole euro zone or the world economy. Having said this, we believe that our paper identifies an important shortcoming of the stability pact, which is often neglected in the policy debate. The paper is structured as follows. Section 2 reviews key features of the stability and growth pact while Section 3 assesses the role of fiscal policy in a monetary union with a special focus on the advantages and disadvantages of deficit and expenditure targets. The empirical methodology and data concerns are presented in Section 4 while Section 5 analyses the main results. Section 6 concludes with a review of the policy implications of our findings.

In this paper, we assess the costs of the stability and growth pact for output growth and stabilisation.We do so for the case of Germany, the largest member of the euro zone and a country close to the Maastricht criteria for debt consolidation.We simulate the effects of various exogenous shocks under the deficit rule of the SGP and under an alternative fiscal rule, an expenditure target. In effect, we ask what the costs of the stability pact for growth and stabilisation are. Furthermore, we assess if the expenditure rule represents a superiorway of organising fiscal stabilisation through the SGP. We demonstrate that the European policy objective of supporting economic growth while maintaining price stability in the monetary union requires a degree of fiscal coordination and probably self-binding mechanisms previously unpractised in Europe. In addition, we show that the SGP, with its reliance on deficit targets, is not sufficient to achieve fiscal discipline without negatively affecting growth. However, a modified version of the SGP may be more successful. The modifications concern both the choice of a primary policy rule and the introduction of a medium-term debt ceiling. Both modifications would help to focus the attention of the policy debate on using revenues wisely in times of strong growth, on letting the automatic stabilisers work effectively in times of low growth, and on reducing debt to more sustainable levels in Europe in the long-term. More weight has to be given to European growth prospects than it is currently the case, thus freeing fiscal policy to focus on letting the automatic stabilisers take effect. Fiscal policy must not be subordinated to short-term political objectives. Instead, the credibility of European fiscal policy must rise to allowthe ECB to relax its monetary policy without risking inflation. In addition, fiscal consolidation should have a more medium-term perspective while its negative growth effects should and could be reduced significantly. We therefore propose that the deficit target be replaced by an expenditure target. In addition, the sustainability of debt can be achieved by augmenting the expenditure target with a long-term debt target. Such a combination of rules is simple, transparent, practical and easy to monitor.