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Tradable deficit permits: efficient implementation of the stability pact in the European Monetary Union
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UNSPECIFIED (1999) Tradable deficit permits: efficient implementation of the stability pact in the European Monetary Union. ECONOMIC POLICY (29). 323-+. ISSN 0266-4658.
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Abstract
Borrowing from the experience of environmental markets, this paper Proposes a system of tradable deficit permits ar an efficient mechanism for implementing fiscal constraints in the European Monetary Union: having chosen an aggregate target for the Union and an initial distribution of permits, EMU countries could be allowed to trade rights to deficit creation. The scheme exploits countries' incentives to minimize their costs, is transparent and flexible in accommodating idiosyncratic shocks and allows for adjustments in case of Europe-wide recessions. In addition, it need not treat all countries identically and can be designed to penalize countries with higher debt to GDP ratios. Finally, the scheme rewards countries for reducing their deficit below the initial allowance, lending credibility to the Stability Pact's goal of a balanced budget in the medium run.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HC Economic History and Conditions | ||||
Journal or Publication Title: | ECONOMIC POLICY | ||||
Publisher: | BLACKWELL PUBL LTD | ||||
ISSN: | 0266-4658 | ||||
Official Date: | October 1999 | ||||
Dates: |
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Number: | 29 | ||||
Number of Pages: | 40 | ||||
Page Range: | 323-+ | ||||
Publication Status: | Published |
Data sourced from Thomson Reuters' Web of Knowledge
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