Policy mix and debt sustainability : evidence from fiscal policy rules

Arbeitspapier

This paper characterises rules-based fiscal policy setting. Basically, we translate a standard monetary policy rule into a simple fiscal policy rule. We then infer on fiscal policymakers' reaction coefficients by testing the rule with GMM. Interaction is also tested directly by the inclusion of monetary policy setting. Our results qualify existing evidence on systematic fiscal policy in two respects. First, fiscal policy usually stabilises public debt. And there is indeed substantial interaction between fiscal and monetary policy via the debt channel. Second, sustainability is achieved with a 'stop-go? cycle of consolidation. Consolidation does not come at the cost of less cyclical stabilisation unless debt ratios are high.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1406

Classification and Topics

• Classification: Wirtschaft ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; Policy Objectives; Policy Designs and Consistency; Policy Coordination
• Subject: monetary policy ; fiscal policy ; policy interaction and policy rules ; debt sustainability ; Finanzpolitik ; Geldpolitik ; Regelgebundene Politik ; Transmissionsmechanismus ; Öffentliche Schulden ; EU-Staaten ; Japan ; Vereinigte Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Claeys, Peter
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/18770
• Last update: 10.03.2025, 11:41 AM CET