Conferences and Working Groups

Effect of the Growth and Stability Pact on New EU Member States

This group is led by Professor Stanley Black and Jason Jones (Economics). Once a country joins the EMU, it no longer has the ability to conduct independent monetary policy. If a country experiences a macroeconomic shock that is different from that of the aggregate members of the EMU, then the only instrument available to counter that shock is fiscal policy. The other option, instigating structural change, lacks the ability to respond quickly to disturbances. The fear is that if a country experiencing an economic downturn finds itself close to the deficit rule of 3% of GDP, then the country must raise taxes and reduce spending just when it needs to do the opposite to stabilize output. This study will analyze policy before and after entry into monetary union. Data will be gathered from the OECD, Eurostat, and from diverse national accounts.