Arbeitspapier
Saving for a rainy day: Estimating the appropriate size of U.S. state budget stabilization funds
Rainy day funds (RDFs) are potentially an important countercyclical tool for states to stabilize their budgets and the overall economy during economic downturns. However, U.S. states have often found themselves exhausting their RDFs and having to raise tax rates or reduce expenditure while still experiencing a downturn. Therefore, how much each state should save in its RDF has become an increasingly important policy question. To address this issue, this paper develops target RDF levels for each U.S. state, based on the estimated short-term revenue component associated with business cycles and also on states' preferences for stable tax rates and expenditure. The analysis shows that in the last 25 years at least 21 states have never saved enough in their RDFs relative to their needed RDFs. The paper provides policy recommendations on reforming the RDF caps.
- Language
-
Englisch
- Bibliographic citation
-
Series: Working Papers ; No. 14-12
- Classification
-
Wirtschaft
Business Fluctuations; Cycles
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
State and Local Taxation, Subsidies, and Revenue
State and Local Budget and Expenditures
- Subject
-
rainy day funds
budget stabilization funds
revenue cyclicality
- Event
-
Geistige Schöpfung
- (who)
-
Zhao, Bo
- Event
-
Veröffentlichung
- (who)
-
Federal Reserve Bank of Boston
- (where)
-
Boston, MA
- (when)
-
2014
- Handle
- Last update
- 10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Zhao, Bo
- Federal Reserve Bank of Boston
Time of origin
- 2014
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