Reconciling Stability and Growth Smart Pacts and Structural Reforms

This paper analyzes the decision of a government facing electoral uncertainty to implement structural reforms in the presence of fiscal restraints similar to the Stability and Growth Pact. The model shows that a pact may harm structural reforms, sacrificing future growth for present stability. The welfare gains brought about by a pact depend on a trade-off between the reduction in the deficit bias and the induced reduction in the amount of structural reform. A pact becomes more attractive (smarter) if it takes into account the fiscal impact of structural reforms, in line with a recent proposal by the European Commission

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Year of publication:	[2006]
Authors:	Beetsma, Roel
Other Persons:	Debrun, Xavier (contributor)
Publisher:	[2006]: [S.l.] : SSRN
Subject:	EU-Staaten \| EU countries \| Finanzpolitik \| Fiscal policy \| Wirtschaftsreform \| Economic reform \| Konvergenzkriterien \| Convergence criteria

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