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Discussion Paper Details

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Title: "Close to Balance or in Surplus": A Policy Maker's Guide to the Implementation of the Stability and Growth Pact

Author(s): Michael J Artis and Marco Buti

Publication Date: July 2000

Keyword(s): Automatic Stabilizers, Budgetary Discipline, Cyclically-Adjusted Budget Balances, EMU, Fiscal Policy and Sustainability Of Public Finances

Programme Area(s): International Macroeconomics

Abstract: Under the Stability and Growth Pact, countries are committed to achieving medium-term budget positions of ?close to balance or in surplus?. The rationale for this commitment is that such budgetary positions would allow for the full working of the built-in stabilizers without triggering the sanction procedures of the Pact. The paper sets out to show how quantifications of the medium-term (?structural?) requirement can accommodate the desired aim and suggests how fiscal measurement and forecasting errors as well as the budgetary effects of ageing may be allowed for. All in all, broadly balanced budgets in the medium term appear to be ?roughly right? for most euro-area countries. Of course, as the cyclical behaviour of the euro-area economy adapts to the new EMU environment, the medium-term targets will need to be re-addressed.

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Bibliographic Reference

Artis, M and Buti, M. 2000. '"Close to Balance or in Surplus": A Policy Maker's Guide to the Implementation of the Stability and Growth Pact'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2515