Fiscal Rules and Macroeconomic Stability
In this paper we analyze the impact of fiscal rules on the effectiveness of fiscal policy as a macroeconomic stabilizing instrument. First, we review the available evidence on the effects of fiscal policy to affect output in the short run and real interest rates and investment and growth in the long... Deskribapen osoa
Egile nagusia: | Andrés Domingo, Javier |
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Beste egile batzuk: | Doménech Vilariño, Rafael |
Formatua: | Artikulua |
Hizkuntza: | Ingelesa |
Argitaratua: |
Ministerio de Hacienda: Servicio de Publicaciones
2006
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Gaiak: | |
Sarrera elektronikoa: |
http://dialnet.unirioja.es/servlet/oaiart?codigo=2007142 |
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Laburpena: |
In this paper we analyze the impact of fiscal rules on the effectiveness of fiscal policy as a macroeconomic stabilizing
instrument. First, we review the available evidence on the effects of fiscal policy to affect output in the short run
and real interest rates and investment and growth in the long run, and we show how the use of fiscal rules has proved
useful in restraining debt and deficits. Secondly, we discuss whether debt consolidation rules trade off higher output
instability in exchange for lower deficits, using three alternative representations of the intertemporal substitution
mechanism in a SDGE framework. Our main conclusion is that both the impact of discretionary fiscal policy and the
strength of automatic stabilizers are largely unaffected by the «tightness» of these rules. Therefore, there is nothing
in the design of fiscal rules aimed at preventing huge and long-lasting deviations of debt from the steady state level,
which makes them an impediment to fiscal policy carrying out its job as a significant stabilizing policy instrument. |
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