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Aspects of economic governance in the Euro area: restoring internal and external balances

Christodoulakis, Nicos (2016) Aspects of economic governance in the Euro area: restoring internal and external balances. Politica Economica, 32 (3). pp. 489-510. ISSN 1120-9496

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Identification Number: 10.1429/85008

Abstract

The Economic Governance for the Euro Area is envisaged to be both an overseeing framework that enables the timely identification of oncoming trouble, as well as a correction mechanism that puts an economy hit by major shocks back in order. The paper discusses the relevance of prevention and correction mechanisms, and finds that exclusively focusing fiscal policy on debt sustainability may be misleading for all and more harmful to the weaker economies in particular, unless internal and external imbalances are taken into account. The fiscal rule should be designed so as to be compatible with debt sustainability in the medium run but also allowed to respond to short term output and current account fluctuations. The micro-management of fiscal components with regards to political feasibility and social equity is also discussed.

Item Type: Article
Official URL: https://www.mulino.it/riviste/issn/1120-9496
Additional Information: © 2016 Società Editrice il Mulino
Divisions: Hellenic Observatory
Subjects: H Social Sciences > HJ Public Finance
J Political Science > JN Political institutions (Europe)
JEL classification: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
F - International Economics > F1 - Trade > F15 - Economic Integration
H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt; Debt Management
Sets: Collections > Economists Online
Research centres and groups > Hellenic Observatory
Date Deposited: 01 Feb 2017 14:04
Last Modified: 01 Jul 2018 23:00
URI: http://eprints.lse.ac.uk/id/eprint/69169

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