Work

Improving the SGP Through a Proper Accounting of Public Investment

Year: 2004

Type: preprint

Abstract: The Stability and Growth Pact (SGP) contains a serious error: the way governments are expected to account for public investment. Correcting this error and applying, as article 104.3 of the EU Treaty allows, the current rules of the Pact to a measure of the budget where the treatment of investment expenditures is done properly would, over time, drive the debt-GDP ratio to the ratio of public capital to GDP. Excluding net public investment from the definition of the budget that is relevant for the Pact would also help in the short run, by inducing countries to shift the composition of domestic demand, rather than to reduce its level.

Source: SSRN Electronic Journal

Authors: Olivier Blanchard, Francesco Giavazzi

Institutions: National Bureau of Economic Research, Peterson Institute for International Economics, Centre for Economic Policy Research, Bocconi University

Language: English

Topic: Fiscal Policies and Political Economy

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1517935268

Cites: 5

Cited by: 230

Related to: 10