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Fiscal Rules and Discretion in a World Economy.
- Source :
- American Economic Review; Aug2018, Vol. 108 Issue 8, p2305-2334, 30p
- Publication Year :
- 2018
-
Abstract
- Abstract Governments are present-biased toward spending. Fiscal rules are deficit limits that trade off commitment to not overspend and flexibility to react to shocks. We compare coordinated rules, chosen jointly by a group of countries, to uncoordinated rules. If governments’ present bias is small, coordinated rules are tighter than uncoordinated rules: individual countries do not internalize the redistributive effect of interest rates. However, if the bias is large, coordinated rules are slacker: countries do not internalize the disciplining effect of interest rates. Surplus limits enhance welfare, and increased savings by some countries or outside economies can hurt the rest. (JEL <italic>D82, E43, E62, H62</italic>) [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00028282
- Volume :
- 108
- Issue :
- 8
- Database :
- Complementary Index
- Journal :
- American Economic Review
- Publication Type :
- Academic Journal
- Accession number :
- 130907416
- Full Text :
- https://doi.org/10.1257/aer.20151180