Restraining Yourself: Fiscal Rules and Stabilization

Author/Editor:

Barry J. Eichengreen ; Tamim Bayoumi

Publication Date:

July 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

State budgets in the United States played a significant macroeconomic role in the 1970s and 1980s, and the level of cyclical responsiveness was affected by the severity of statutory and constitutional fiscal restraints. Moving from no fiscal restraints to the most stringent restraints lowered the fiscal offset to income fluctuations by around 40 percent. Simulations indicate that a reduction in aggregate fiscal stabilizers of this size could lead to a significant increase in the variance of aggregate output.

Series:

Working Paper No. 1994/082

Subject:

Notes:

Also published in Staff Papers, Vol. 42, No. 1, March 1995.

English

Publication Date:

July 1, 1994

ISBN/ISSN:

9781451954708/1018-5941

Stock No:

WPIEA0821994

Pages:

24

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