Archive

Margit Schratzenstaller:
Steuerwettbewerb in der erweiterten EU (in German)

Philip Arestis and Malcolm Sawyer
On Fiscal Policy and Budget Deficits

A major argument used against the use of fiscal policy comes from the view that there are automatic forces within an economic system to ensure high levels of demand. This paper argues that the case for fiscal policy in general rests on the proposition that there are no such market forces that ensure high levels of demand. There is, thus, a need for macroeconomic policy to perform this task. The argument against fiscal policy to the effect that it does not raise the level of economic activity, does not apply when this view of fiscal policy is adopted.

JEL classification: E 62

Jörg Bibow
Haushaltskonsolidierungsstrategien im Vergleich.Warum die deutsch-europäische Fiskalpolitik versagt

Th is paper analyses the issues of public finance sustainability and suitability of strategies aimed at fiscal consolidation, contrasting growth-based versus thriftbased strategies. Empirically, this study investigates the experiences with consolidation over the 1990s in the U.S., Japan, and the eurozone while scrutinizing disparities within Europe. It is argued that neither Germany’s virtuous stabilityoriented past, which in many ways provided the blueprint for the Maastricht regime’s design, nor any other small economy’s peculiar record with consolidation offers any guidance to the EMU today. For that purpose only the case of the US case may be relevant, featuring cooperative macroeconomic policies geared at steering domestic demand growth, with sustainable public finances as a consequence of their success. Reforms should thus focus on securing cooperation and proper growth orientation in macroeconomic policymaking, which may be achieved through committing fical and monetary policies to common goals and a nominal GDP targeting strategy.

JEL classifications: E 58, E 61, E 62, E 63, E 65

Jochen Hartwig
Nichts als Strohfeuer? Eine kritische Analyse des wirtschaftspolitischen Assignments im »Neuen Konsens« mit Hilfe eines makroökonometrischen Politiksimulationsmodells der Schweizer Volkswirtschaft

The paper is concerned with the traditional »assignment« to be found in many textbooks that holds central bankers responsible for inflation – and inflation only – while government politicians are recommended to care for the short-term stabilisation of the economy (or not to interfere at all, respectively). Building on monetary and fiscal policy simulations done with a macroeconometric model of the Swiss economy, possible long-term real effects of monetary policy are established. Also, a potential role for fiscal policy in the control of inflation is located. Since macroeconometric modelling is now widely regarded as being outmoded, special care is taken to argue that neither the seminal »Lucas critique« nor more recent time series approaches can be said to have overridden the traditional approach.

JEL classifications: C 51, C 53, E 17, E 52, E 63

Waltraud Schelkle
Basic Redress or Incremental Adjustment? On Recent Debates about the Reform of the Stability and Growth Pact

In a substantive paper, Buti et al. (2003) discuss various criticisms of the European Stability and Growth Pact and propose a number of amendments. The bottom line of their review is that reform requires internal adjustment only, keeping the norm of relying on rule-based fiscal consolidation and automatic stabilisation. By contrast, I argue that their proposals imply not merely internal adjustment but a basic redress of the Pact's thrust. If implemented they would turn the existing disciplinarian device confined to national budget consolidation into an insurance arrangement for collective stabilisation. This insurance perspective suggests to go further down that route to make coordination sustainable.

JEL classication: E 62