Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-22T16:07:25.673Z Has data issue: false hasContentIssue false
  • English
  • Français

Benchmarks and Targets Under the SGP: Evaluating Safe Deficit Targets Using NiGEM

Published online by Cambridge University Press:  26 March 2020

Ray Barrell  and
Ian Hurst
Ray Barrell*
Affiliation:
National Institute of Economic and Social Research
Ian Hurst*
Affiliation:
National Institute of Economic and Social Research
*
e-mails: [email protected], [email protected]
e-mails: [email protected], [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Fiscal pacts and automatic stabilisers are widely discussed in the policy debate. Pacts put bounds on borrowing, and the bounds have to be evaluated. We use our model, NiGEM, to set safe targets for European deficits. Although there are many issues to consider, we conclude that cyclically adjusted target deficits of 1 per cent of GDP would ensure that governments seldom had to borrow more than 3 per cent of GDP, especially if they stood ready to raise taxes when the deficit deteriorated either for reasons separate from cyclical developments or because supply shocks had occurred. Offsetting the automatic stabilisers when supply shocks occur is shown to help stabilise output volatility.

Type
Articles
Information
National Institute Economic Review , Volume 185 , July 2003 , pp. 54 - 63
Copyright
Copyright © 2003 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

∗

The authors would like to thank Stephen Hall, Rebecca Riley, Martin Weale, Olga Pomerantz and Jan int Veld and participants in a Treasury Seminar for their comments. This paper is the result of work commissioned by the UK Treasury as background to the Treasurys continuing work on UK and EU fiscal policy frameworks.

References

Barrell, R., Byrne, J. and Dury, K. (2003), ‘The implications of diversity in consumption behaviour for the choice of monetary policy rules in Europe’, Economic Modelling.CrossRefGoogle Scholar
Barrell, R. and Dury, K. (2000), ‘An evaluation of monetary targeting regimes’, National Institute Economic Review, 174, October.CrossRefGoogle Scholar
Barrell, R. and Dury, K. (2001), ‘The Stability and Growth Pact, will it ever be breached? An analysis using stochastic simulations’, in Brunila, A., Buti, M. and Franco, D. (eds), The Stability and Growth Pact: The Architecture of Fiscal Policy in EMU.Google Scholar
Barrell, R., Dury, K. and Hurst, I. (2003), ‘International monetary policy co-ordination: an evaluation using a large econometric model’, Economic Modelling.CrossRefGoogle Scholar
Barrell, R., Dury, K., Hurst, I. and Pain, N. (2001), ‘Modelling the world economy: the NIESR model NIGEM’, presented at an ENEPRI workshop, Paris, July.Google Scholar
Barrell, R., Hurst, I. and Kirsanova, T. (2003), ‘Choosing the regime in an uncertain world, the UK and monetary union’, National Institute Discussion Paper No. 209.Google Scholar
Barrell, R., Hurst, I. and Pina, A. (2003), ‘Fiscal targets, automatic stabilisers and their effects on output’, Fiscal Policy, Bank of Italy Conference Volume.Google Scholar
Barrell, R. and Pina, A. (2003), ‘How important are automatic stabilisers in Europe?’, Economic Modelling.CrossRefGoogle Scholar
Brunila, A., Buti, M. and Franco, D. (eds) (2001), The Stability and Growth Pact: The Architecture of Fiscal Policy in EMU.CrossRefGoogle Scholar
Brunila, A., Buti, M. and in't Veld, J.W. (2002), ‘Fiscal policy in Europe: how effective are the automatic stabilisers?’, European Commission Economic Paper No. 177.Google Scholar
Dury, K. and Pina, A.M. (2003), ‘Fiscal policy in EMU: simulating the operation of the Stability Pact’, Journal of Policy Modelling.CrossRefGoogle Scholar
HM Treasury (2003), ‘Fiscal stabilisation and EMU’, Discussion paper, available on website.Google Scholar
Hughes Hallett, A.J. and McAdam, P. (2003), ‘Deficit targeting strategies’, Journal of Common Market Studies, 41, 3.CrossRefGoogle Scholar
Massmann, M., Mitchell, J. and Weale, M. (2003), ‘Business cycles and turning points: a survey of statistical techniques’, National Institute Economic Review, 183, January.Google Scholar
NIESR (2002), NiGEM Model Manuals available at www.niesr.ac.uk.Google Scholar