Stability Criteria and Convergence: The Role of the System of National Accounts for Fiscal Policy in Europe

DIW Discussion Paper No. 318

29 Pages Posted: 30 Apr 2003

See all articles by Tilman Brück

Tilman Brück

IGZ - Leibniz Institute of Vegetable and Ornamental Crops; ISDC - International Security and Development Center; IZA Institute of Labor Economics

Andreas Cors

DIW Berlin, German Institute for Economic Research

Klaus F. Zimmermann

Global Labor Organization (GLO); UNU-MERIT; Maastricht University, Department of Economics; Free University Berlin; University of Bonn; Centre for Economic Policy Research (CEPR); Journal of Population Economics

Rudolf Zwiener

DIW Berlin, German Institute for Economic Research

Date Written: December 2002

Abstract

The standardisation of the European systems of national accounts has progressed significantly in recent years. Some room for interpretation remains in regard to some accounting standards, the periodicity of the data, and the quality of the forecasts of budget deficits. Yet national accounts data of the eurozone countries are now a reliable basis for macroeconomic policy decisions. The stability and growth pact of the eurozone countries relies heavily on one indicator of fiscal discipline, the budget deficit as a share of gross domestic product. Drawing from simulation evidence of the German economy, it is argued that fulfilling the deficit target is no guarantee for achieving output stabilisation. The pact hence fails to internalise the externalities arising from a decentralised fiscal policy in the European monetary union. The deficit target could be replaced with an expenditure target. Given the macroeconomic policy objectives of the euro economies it would be more appropriate to hand the supervision of an amended stability pact to an independent council of economic experts. Such council could assess the macroeconomic environment more carefully and could have the authority to caution and fine fiscally irresponsible eurozone governments.

Keywords: simulation, fiscal policy, international policy coordination

JEL Classification: C82, E37, E62, F42, M40

Suggested Citation

Brück, Tilman and Cors, Andreas and Zimmermann, Klaus F. and Zwiener, Rudolf, Stability Criteria and Convergence: The Role of the System of National Accounts for Fiscal Policy in Europe (December 2002). DIW Discussion Paper No. 318, Available at SSRN: https://ssrn.com/abstract=382720 or http://dx.doi.org/10.2139/ssrn.382720

Tilman Brück (Contact Author)

IGZ - Leibniz Institute of Vegetable and Ornamental Crops ( email )

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HOME PAGE: http://www.igzev.de

ISDC - International Security and Development Center ( email )

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IZA Institute of Labor Economics

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Andreas Cors

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Klaus F. Zimmermann

Global Labor Organization (GLO) ( email )

Bonn
Germany

HOME PAGE: http://https://glabor.org/

UNU-MERIT ( email )

Keizer Karelplein 19
Maastricht, 6211TC
Netherlands

Maastricht University, Department of Economics ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

University of Bonn

Postfach 2220
Bonn, D-53012
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Journal of Population Economics

Tiergartenstr. 17
D-69121 Heidelberg
Germany

Rudolf Zwiener

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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