Arbeitspapier
Rules versus discretion in fiscal policy
This paper purports to apply the Kydland-Prescott framework of dynamic inconsistency to the case of fiscal policy, by considering the trade-off between output and debt stabilization. The Government budget constraint provides the link between debt dynamics and the level of activity, influenced by fiscal policy. Contrary to what happens in the monetary policy framework, however, a commitment is not always superior to discretion, even in the absence of uncertainty, but only when the public debt-GDP ratio is sufficiently large. The introduction of uncertainty, as usual, implies a reduction in the net benefit generated by the adoption of a fixed rule.
- Language
-
Englisch
- Bibliographic citation
-
Series: Quaderni di Dipartimento - EPMQ ; No. 199
- Classification
-
Wirtschaft
Policy Objectives; Policy Designs and Consistency; Policy Coordination
Fiscal Policy
National Deficit; Surplus
National Debt; Debt Management; Sovereign Debt
Forecasts of Budgets, Deficits, and Debt
- Subject
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rules
discretion
time inconsistency
fiscal policy
- Event
-
Geistige Schöpfung
- (who)
-
Bianchi, Carluccio
Menegatti, Mario
- Event
-
Veröffentlichung
- (who)
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Università degli Studi di Pavia, Dipartimento di Economia Politica e Metodi Quantitativi (EPMQ)
- (where)
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Pavia
- (when)
-
2007
- Handle
- Last update
-
10.03.2025, 11:44 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
- Bianchi, Carluccio
- Menegatti, Mario
- Università degli Studi di Pavia, Dipartimento di Economia Politica e Metodi Quantitativi (EPMQ)
Time of origin
- 2007
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