Restraining Yourself: Fiscal Rules and Stabilization
July 1, 1994
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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.
Subject: Budget planning and preparation, Expenditure, Fiscal policy, Fiscal stabilization, Fiscal stance, Public financial management (PFM)
Keywords: budget balance, Budget planning and preparation, Europe, fiscal restraints, Fiscal stabilization, Fiscal stance, government, government balance, government structure, Govt. deficit, local government, local government sector, State budget, state government, state government equation, WP
Pages:
24
Volume:
1994
DOI:
Issue:
082
Series:
Working Paper No. 1994/082
Stock No:
WPIEA0821994
ISBN:
9781451954708
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 42, No. 1, March 1995.
