Reforming Eurozone Fiscal Rules. A Critical Appraisal of the Debate

Autor: SALVATORE D'ACUNTO, DOMENICO SUPPA
Přispěvatelé: D'Acunto, Salvatore, Suppa, Domenico
Jazyk: angličtina
Rok vydání: 2021
Předmět:
Blanchard et al.
2020). During the sovereign debt crisis
Member States were forced to deflate in periods of weak economic activity and high unemployment
losing capital stock and human capital. With the pandemic emergency
the European Commission has decided to suspend the rules in force and start a reflection about how to reform the fiscal discipline. It seems emerging a widespread consensus on the abandonment of the approach based on the deficit / GDP ratio target and its substitution with the Stochastic Debt Sustainability Analysis (SDSA). This methodology is based on the estimation of confidence intervals for the medium / long-term debt / GDP ratio trend
in various hypothetical scenarios of growth and short-term shocks. According to this approach
fiscal policy would be evaluated for its consistency with stabilization of the debt / GDP ratio. The evaluation should be entrusted to technical independent authorities and the sanctioning power should fall into the responsibility of the European Court of Justice (Wyplosz
2019). The aim of this paper is to critically assess whether and to what extent the approach based on the SDSA may overcome the limits implicit in the approach based on deterministic numerical targets
The EU fiscal rules have been under criticism due to the weakness of their episte- mic foundations and their pro-cyclical bias (Brooks and Basile
2019
Databáze: OpenAIRE
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