The Stability and Growth Pact of the European Monetary Union is expected to guarantee the compliance with one of the Maastrich Treaty's fiscal convergence criteria, namely the requirement to hold a country's overall net deficit below 3% of its GDP in EMU. The sanctioning of countries with excessive deficits is by no means automatic but subject to a complicated and time-consuming voting procedure. In the presented experiment we investigate the effectiveness of the Stability and Growth Pact.

Co-author Matthius Sutter