DP1505 Four Essays and a Funeral: Budgetary Arithmetic under the Maastricht Treaty
|Author(s):||Andrew Hughes Hallett, Peter McAdam|
|Publication Date:||December 1996|
|Keyword(s):||Convergence Criteria, Credibility, Debt and Deficit Ratios|
|JEL(s):||E63, F15, H63|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1505|
This paper analyses four popular themes in the debate about the transition to monetary union: (a) fiscal discipline creating gains in credibility; (b) there being perceptible risk of a bail out for the highly indebted countries; (c) budgets being successfully cut to the required 3% limit in conditions of low growth and low inflation; and (d) the convergence criteria actually being mutually consistent. The usual accounting identities show the first two effects are likely to be small or non-existent, whereas the second two are unlikely to be satisfied.