A Golden Rule of Public Finance or a Fixed Deficit Regime? Growth and Welfare Effects of Budget Rules

Arbeitspapier

In this paper, we compare growth and welfare e¤ects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that a fixed deficit regime does not affect the long run growth rate compared to a balanced budget while the growth rate is increased by a golden rule. Welfare effects are ambiguous. Simulations indicate that economies populated by households who have a strong tendency to smooth consumption should adhere to a balanced budget rather than a golden rule or a fixed deficit rule from a welfare point of view.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: FiFo-CPE Discussion Paper ; No. 08-7

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; National Debt; Debt Management; Sovereign Debt ; Economic Growth and Aggregate Productivity: General ; National Government Expenditures and Related Policies: General ; National Deficit; Surplus
• Subject: Budget rules ; golden rule of public finance ; fiscal policy ; endogenous growth ; welfare ; Finanzpolitik ; Haushaltsdefizit ; Regelgebundene Politik ; Wirtschaftspolitische Wirkungsanalyse ; Wirtschaftswachstum ; Neue Wachstumstheorie ; Wohlfahrtseffekt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Groneck, Max
• Event: Veröffentlichung
• (who): Finanzwissenschaftliches Forschungsinstitut an der Universität zu Köln (FiFo Köln)
• (where): Köln
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/27680