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Budget rules with a public debt reduction target
Journal Title: ECONOMIA PUBBLICA  
Author/s:  Alessandro Petretto 
Year:  2021 Issue: Language: English 
Pages:  18 Pg. 7-24 FullText PDF:  148 KB
DOI:  10.3280/EP2021-001001
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After the Stability and Growth Pact suspension to face the Covid-19 emergency and subsequent financial crisis, a novel fiscal discipline must be designed for the Euro Area. In this short paper, we formally analyze and compare three budget rules and their efficacy in pursuing a reasonable public debt reduction target, explicitly envisaged by them. The rules we refer to are: (a) the structural adjustment toward a budget medium term objective, required by Fiscal Compact discipline; (b) the expenditure rule proposed by European Fiscal Board and (c) the Musgrave Golden rule. By a simple simulation exercise we argue that the rule proposed by EFB seems to be, for a country with a low rate of growth and a high level of public debt, preferable to the other two.
Keywords: Budget rule, public debt target, fiscal stance
Jel Code: H6

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Alessandro Petretto, in "ECONOMIA PUBBLICA " 1/2021, pp. 7-24, DOI:10.3280/EP2021-001001

   

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