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- Title
FTPL-Perspective on Tradable Deficit Permits in the EMU.
- Authors
Bizer, Kilian; Gubaydullina, Zulia; Rahahleh, Hazim; Sesselmeier, Werner
- Abstract
The Growth and Stability Pact restricts member states in their fiscal policy but also causes inflexibility in the pursuit of wide-ranging economic and social reforms. Tradable deficit permits allow more flexibility for individual member states and provide a stick for those who exceed the deficit limit but also a carrot to those who stay below it. But does the trade in deficit permits affect the monetary objectives of the European Central Bank (ECB)? We argue that from a perspective of fiscal theory of the price level, trade in deficit permits can lead to higher inflation depending on the growth rate and the debt/GDP ratio of the member states.
- Subjects
CENTRAL banking industry; FISCAL policy; ECONOMIC reform; PRICE inflation; EUROPEAN Central Bank; EUROPEAN Union
- Publication
Atlantic Economic Journal, 2007, Vol 35, Issue 3, p259
- ISSN
0197-4254
- Publication type
Article
- DOI
10.1007/s11293-007-9075-9