Fiscal stabilisation and EMU
The Treasury discussion paper Fiscal stabilisation and EMU assesses whether a greater stabilisation role could be delivered through fiscal policy, were the UK to join EMU. The study is based on the premise that, were the UK to join EMU, and be subject to asymmetric shocks, or common shocks that had an asymmetric impact due to different structures, monetary policy as set by the European Central Bank for the euro area as a whole might not be able to react to UK circumstances alone. In such circumstances, there may be a case for an enhanced stabilisation role for fiscal policy. The paper explores a number of policy options to make discretionary fiscal policy more effective for stabilisation purposes and strengthen the automatic stabilisers, including a new symmetrical fiscal rule to trigger the Government to consider taking action and publishing a Stabilisation Report to enhance transparency.
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Fiscal stabilisation and EMU
PDF file of executive summary (96kb)
PDF file of chapters 1, 2 and 3 (286kb)
PDF file of chapters 4, 5, 6, 7, references and annex (450kb)