EMU as a device for collective fiscal retrenchment

Article Abstract:

The proposed use of the European Monetary Union (EMU) as a tool for obtaining collective fiscal retrenchment has become controversial. In 1996, Paul De Grauwe disagreed with collective fiscal limits as a requirement for entering EMU. He argued that joining the EMU already aids in deficit reduction, and lessens nominal interest rates. European national governments, meanwhile, have the freedom to participate in fiscal policy. De Grauwe's reasoning did not consider the issue of transition when the European national government debt is higher than the US state governments'.

Public Finance Activities, Fiscal Policy, Laws, regulations and rules, Beliefs, opinions and attitudes, European Monetary System, De Grauwe, Paul

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Spontaneous order on the road back from socialism: an Asian perspective

Article Abstract:

China, Vietnam and Laos are changing their nominally socialist governments into more market-based systems. Many countries making the postsocialist transition, however, are experiencing economic problems. Economist Friedrich A. Hayek supported the concept of spontaneous order in countries changing to a market economy. The government plays a small but important role in supporting this transition by taking a gradual but deliberate approach toward privatization. China's decision to liberalize agriculture is an excellent example of spontaneous order.

China, Economic aspects, Economic policy, Agricultural policy, Privatization, Privatization (Business), Free enterprise, Hayek, F.A.

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Credible economic liberalizations and overborrowing

Article Abstract:

A move from economic repression to economic liberalization is examined for susceptibility to borrowing. A simplified Fisher two-period model shows the possible malfunctions in a capital market when uncertainty over new investments increases. Private savings in period 1 could decrease when real-side reforms are likely to be permanent and authentic. Authorities should also be warned that private savings could decline and investment could increase partly from false expectations about the reforms.

Capital market, Capital markets, Industrial policy

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