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Fiscal Policy Rules (fiscal + policy_rule)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	80%

Selected Abstracts

Monetary and Fiscal Policy Rules in the EMU

GERMAN ECONOMIC REVIEW, Issue 4 2004
Bas Van Aarle
EMU; fiscal policy; monetary policy Abstract. This paper studies the design and effects of monetary and fiscal policy in the euro area. To do so, a stylized two-region model of monetary and fiscal policy rules in the EMU is built. We analyse how monetary and fiscal rules affect the adjustment dynamics in the model. Both the effects on the individual countries and on the EMU aggregate economy are studied. Three aspects play an important role in the analysis: (i) the consequences of alternative monetary and fiscal policy rules, (ii) the consequences of asymmetries between EMU countries (asymmetries in macroeconomic shocks and macroeconomic structures), and (iii) the role of alternative degrees of backward- and forward-looking behaviour in consumer decisions and inflation expectations. [source]

Why has the Stability and Growth Pact Failed?

INTERNATIONAL FINANCE, Issue 2 2004
Jakob De Haan
This paper evaluates the Stability and Growth Pact. After briefly examining the rules in place and the experience so far, the Pact is analysed from a political economy perspective, focusing on the choice of hard versus soft law and drawing inferences from characteristics of successful fiscal rules at the state level in the USA. The main argument of the paper is that the Pact's enforcement mechanisms are too weak. It is also argued that big countries are less likely to adhere to the fiscal policy rules in place. Reform of the Pact should aim at stricter, instead of more flexible, rules and should not rely on cyclically adjusted deficit estimates. [source]

Deficit Targeting Strategies: Fiscal Consolidation and the Probability Distribution of Deficits under the Stability Pact

JCMS: JOURNAL OF COMMON MARKET STUDIES, Issue 3 2003
A.J. Hughes Hallett
Using stochastic simulations, this article analyses the probability distribution of a country's deficit ratio under fixed exchange rates and a variety of monetary and fiscal policy rules. The purpose is to show how the probability of an ,excessive deficit', defined by Europe's Stability Pact as a deficit to GDP ratio above 3 per cent, varies with different deficit targets and policy rules. Using a macro model, we find that when subject to historically consistent shocks, these fiscal ratios typically have a wide distribution, with fat tails and significantly longer tails on the upper side. That means fiscal targets may have to be country-specific and conservative, and that fiscal policy has to be forward-looking to keep the probability of excessive deficits below acceptable limits. [source]

Government Spending and the Taylor Principle

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 1 2009
GISLE JAMES NATVIK
public expenditures; Taylor principle; fiscal policy rules; rule-of-thumb consumers This paper explores how government size affects the scope for equilibrium indeterminacy in a New Keynesian economy, where part of the population live hand-to-mouth. The main result is that a higher level of public consumption is likely to generate indeterminacy and render the Taylor principle insufficient as criterion for equilibrium uniqueness. This holds even though fiscal policy serves to reduce swings in current income. Only if government consumption is a substitute for private consumption, will it narrow the scope for indeterminacy. Hence monetary policy should be conducted with an eye to the amount and composition of government consumption. [source]