The Fiscal Framework in the Easter Caribbean Currency Union

Lessons from the Euro Area?

Andrew Hughes Hallet, Svend E. Hougaard Jensen

Publikation: KonferencebidragPaperForskningpeer review

Resumé

This paper reviews the state of economic policy management in the Euro Area. As the European sovereign debt crisis sadly demonstrates, there is an urgent need for an agreed fiscal framework in replacement of the failed Stability and Growth Pact. We suggest a framework that aims at a better co-ordination between monetary and fiscal policy, where fiscal policy focuses on long run objectives and monetary policy on short run objectives, as an alternative. In such a framework, fiscal policies can be credibly pre-committed without undermining the authority of democratically elected representatives. We therefore argue that the restraints on fiscal policy should focus on structural imbalances – principally the level of public debt – and not on the size of the public sector or the composition of expenditures and revenues. We then review the reasons, theoretical as well as practical, why debt targets are superior to deficit targets or limits, and we propose an excess debt protocol to give enforceable form to those targets. To demonstrate how public sector debt targets provide a practical way to achieve such a set up, we use the idea of “fiscal space” to provide a mechanism for identifying the stable region within which a debt targeting regime should operate. This is especially important at the smaller country level where small scale, economic dependence and the inability to diversify, inevitably make budgets and budget revenues more volatile.
OriginalsprogEngelsk
Publikationsdato2013
StatusUdgivet - 2013
BegivenhedThe 45th Annual Monetary Studies Conference - Kingston, Jamaica
Varighed: 2 okt. 20134 okt. 2013
Konferencens nummer: 45
http://cbes.ccmf-uwi.org/

Konference

KonferenceThe 45th Annual Monetary Studies Conference
Nummer45
LandJamaica
ByKingston
Periode02/10/201304/10/2013
Internetadresse

Bibliografisk note

CBS Bibliotek har ikke adgang til materialet

Citer dette

Hallet, A. H., & Hougaard Jensen, S. E. (2013). The Fiscal Framework in the Easter Caribbean Currency Union: Lessons from the Euro Area?. Afhandling præsenteret på The 45th Annual Monetary Studies Conference , Kingston, Jamaica.
Hallet, Andrew Hughes ; Hougaard Jensen, Svend E. / The Fiscal Framework in the Easter Caribbean Currency Union : Lessons from the Euro Area?. Afhandling præsenteret på The 45th Annual Monetary Studies Conference , Kingston, Jamaica.
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Hallet, AH & Hougaard Jensen, SE 2013, 'The Fiscal Framework in the Easter Caribbean Currency Union: Lessons from the Euro Area?' Paper fremlagt ved The 45th Annual Monetary Studies Conference , Kingston, Jamaica, 02/10/2013 - 04/10/2013, .

The Fiscal Framework in the Easter Caribbean Currency Union : Lessons from the Euro Area? / Hallet, Andrew Hughes; Hougaard Jensen, Svend E.

2013. Afhandling præsenteret på The 45th Annual Monetary Studies Conference , Kingston, Jamaica.

Publikation: KonferencebidragPaperForskningpeer review

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T1 - The Fiscal Framework in the Easter Caribbean Currency Union

T2 - Lessons from the Euro Area?

AU - Hallet, Andrew Hughes

AU - Hougaard Jensen, Svend E.

N1 - CBS Library does not have access to the material

PY - 2013

Y1 - 2013

N2 - This paper reviews the state of economic policy management in the Euro Area. As the European sovereign debt crisis sadly demonstrates, there is an urgent need for an agreed fiscal framework in replacement of the failed Stability and Growth Pact. We suggest a framework that aims at a better co-ordination between monetary and fiscal policy, where fiscal policy focuses on long run objectives and monetary policy on short run objectives, as an alternative. In such a framework, fiscal policies can be credibly pre-committed without undermining the authority of democratically elected representatives. We therefore argue that the restraints on fiscal policy should focus on structural imbalances – principally the level of public debt – and not on the size of the public sector or the composition of expenditures and revenues. We then review the reasons, theoretical as well as practical, why debt targets are superior to deficit targets or limits, and we propose an excess debt protocol to give enforceable form to those targets. To demonstrate how public sector debt targets provide a practical way to achieve such a set up, we use the idea of “fiscal space” to provide a mechanism for identifying the stable region within which a debt targeting regime should operate. This is especially important at the smaller country level where small scale, economic dependence and the inability to diversify, inevitably make budgets and budget revenues more volatile.

AB - This paper reviews the state of economic policy management in the Euro Area. As the European sovereign debt crisis sadly demonstrates, there is an urgent need for an agreed fiscal framework in replacement of the failed Stability and Growth Pact. We suggest a framework that aims at a better co-ordination between monetary and fiscal policy, where fiscal policy focuses on long run objectives and monetary policy on short run objectives, as an alternative. In such a framework, fiscal policies can be credibly pre-committed without undermining the authority of democratically elected representatives. We therefore argue that the restraints on fiscal policy should focus on structural imbalances – principally the level of public debt – and not on the size of the public sector or the composition of expenditures and revenues. We then review the reasons, theoretical as well as practical, why debt targets are superior to deficit targets or limits, and we propose an excess debt protocol to give enforceable form to those targets. To demonstrate how public sector debt targets provide a practical way to achieve such a set up, we use the idea of “fiscal space” to provide a mechanism for identifying the stable region within which a debt targeting regime should operate. This is especially important at the smaller country level where small scale, economic dependence and the inability to diversify, inevitably make budgets and budget revenues more volatile.

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Hallet AH, Hougaard Jensen SE. The Fiscal Framework in the Easter Caribbean Currency Union: Lessons from the Euro Area?. 2013. Afhandling præsenteret på The 45th Annual Monetary Studies Conference , Kingston, Jamaica.