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Flexible Fiscal Rules and Countercyclical Fiscal Policy

2016-01-22 Business & Economics
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Release : 2016-01-22
Genre : Business & Economics
Kind : eBook
Book Rating : 465/5 ( reviews)

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Book Synopsis Flexible Fiscal Rules and Countercyclical Fiscal Policy by : Ms.Martine Guerguil

Download or read book Flexible Fiscal Rules and Countercyclical Fiscal Policy written by Ms.Martine Guerguil. This book was released on 2016-01-22. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the impact of different types of flexible fiscal rules on the procyclicality of fiscal policy with propensity scores-matching techniques, thus mitigating traditional self-selection problems. It finds that not all fiscal rules have the same impact: the design matters. Specifically, investment-friendly rules reduce the procyclicality of both overall and investment spending. The effect appears stronger in bad times and when the rule is enacted at the national level. The introduction of escape clauses in fiscal rules does not seem to affect the cyclical stance of public spending. The inclusion of cyclical adjustment features in spending rules yields broadly similar results. The results are mixed for cyclically-adjusted budget balance rules: enacting the latter is associated with countercyclical movements in overall spending, but with procyclical changes in investment spending. Structural factors, such as past debt, the level of development, the volatility of terms of trade, natural resources endowment, government stability, and the legal enforcement and monitoring arrangements backing the rule also influence the link between fiscal rules and countercyclicality. The results are robust to a wide set of alternative specifications.

Fiscal Rules and Countercyclical Policy

2003-11-01 Business & Economics
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Release : 2003-11-01
Genre : Business & Economics
Kind : eBook
Book Rating : 223/5 ( reviews)

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Book Synopsis Fiscal Rules and Countercyclical Policy by : Mr.Evan Tanner

Download or read book Fiscal Rules and Countercyclical Policy written by Mr.Evan Tanner. This book was released on 2003-11-01. Available in PDF, EPUB and Kindle. Book excerpt: Fiscal rules—legal restrictions on government borrowing, spending, or debt accumulation (like the Gramm-Rudman-Hollings Act in the United States)—have recently been adopted or considered in several countries, both industrial and developing. Previous literature stresses that such laws restrict countercyclical government borrowing, thus preventing intertemporal equalization of marginal deadweight losses of taxation—an idea associated with Frank Ramsey. However, such literature typically abstracts from persistent current deficits that are financed by future tax increases. Eliminating such deficits may substantially reduce tax rate variability—the very goal of countercyclical borrowing—even over a finite horizon. Thus, Gramm-Rudman-Hollings and Frank Ramsey are not necessarily enemies and they may even be good friends!

Second-Generation Fiscal Rules

2018-04-13 Business & Economics
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Release : 2018-04-13
Genre : Business & Economics
Kind : eBook
Book Rating : 685/5 ( reviews)

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Book Synopsis Second-Generation Fiscal Rules by : Luc Eyraud

Download or read book Second-Generation Fiscal Rules written by Luc Eyraud. This book was released on 2018-04-13. Available in PDF, EPUB and Kindle. Book excerpt: Fiscal rule frameworks have evolved significantly in response to the global financial crisis. Many countries have reformed their fiscal rules or introduced new ones with a view to enhancing the credibility of fiscal policy and providing a medium-term anchor. Enforcement and monitoring mechanisms have also been upgraded. However, these innovations have made the systems of rules more complicated to operate, while compliance has not improved. The SDN takes stock of past experiences, reviews recent reforms, and presents new research on the effectiveness of rules. It also proposes guiding principles for future reforms to strike a better balance between simplicity, flexibility, and enforceability. Read the blog

Revisiting the Countercyclicality of Fiscal Policy

2023-04-29 Business & Economics
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Release : 2023-04-29
Genre : Business & Economics
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Book Rating : /5 ( reviews)

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Book Synopsis Revisiting the Countercyclicality of Fiscal Policy by : João Tovar Jalles

Download or read book Revisiting the Countercyclicality of Fiscal Policy written by João Tovar Jalles. This book was released on 2023-04-29. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a novel dataset of time-varying measures on the degree of countercyclicality of fiscal policies for advanced and developing economies between 1980 and 2021. The use of time-varying measures of fiscal stabilization, with special attention to potential endogenity issues, overcomes the major limitation of previous studies and alllows the analysis to account for both country-specific as well as global factors. The paper also examines the key determinants of countercyclicality of fiscal policy with a focus on factors as severe crises, informality, financial development, and governance. Empirical results show that (i) fiscal policy tends to be more counter-cyclical during severe crises than typical recessions, especially for advanced economies; (ii) fiscal counter-cyclicality has increased over time for many economies over the last two decades; (iii) discretionary and automatic countercyclicality are both strong in advanced economies but acyclical (at times procyclical) in low-income countries, (iv) fiscal countercyclicality operates primarily through the expenditure channel, particularly for social benefits, (vi) better financial development, larger government size and stronger institutional quality are associated with larger countercyclical effects of fiscal policy. Our results are robust to various specifications and endogeneity checks.

Procyclical Fiscal Policy: Shocks, Rules, and Institutions - A View From MARS

2006-01-01
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Release : 2006-01-01
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Book Rating : 874/5 ( reviews)

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Book Synopsis Procyclical Fiscal Policy: Shocks, Rules, and Institutions - A View From MARS by : Paolo Manasse

Download or read book Procyclical Fiscal Policy: Shocks, Rules, and Institutions - A View From MARS written by Paolo Manasse. This book was released on 2006-01-01. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the roles of shocks, rules, and institutions as possible sources of procyclicality in fiscal policy. By employing parametric and nonparametric techniques, I reach the following four main conclusions. First, policymakers' reactions to the business cycle is different depending on the state of the economy-fiscal policy is "acyclical" during economic bad times, while it is largely procyclical during good times. Second, fiscal rules and fiscal responsibility laws tend to reduce the deficit bias on average, and seem to enhance, rather than to weaken, countercyclical policy. However, the evidence also suggests that fiscal frameworks do not exert independent effects when the quality of institutions is accounted for. Third, strong institutions are associated to a lower deficit bias, but their effect on procyclicality is different in good and bad times, and it is subject to decreasing returns. Fourth, unlike developed countries, fiscal policy in developing countries is procyclical even during (moderate) recessions; in "good times," however, fiscal policy is actually more procyclical in developed economies.

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