Does It Lead to Procyclical Fiscal Policies?
) (Institute of Economics, University of Lodz) Abstract One of the often discussed negative aspects of the Stability and Growth Pact is the rigidity of its deficit rule. Several reform proposals aim currently at alleviating the rule in order to allow the automatic stabilizers to operate freely. However, such a reform is likely to cause even further deterioration of fiscal balances in the member countries. The empirical evidence presented in this paper shows that, in the past, increasing the structural deficit had a strong negative impact on a degree of anti-cyclical fiscal stabilization. This suggests that the reform of the Pact, through higher structural deficits, can decrease rather then increase the scope of anti-cyclical fiscal actions in the EMU member countries. Download InfoTo download: If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of furthe
