Hidden Bibliographic Details
| Other authors / contributors: | International Monetary Fund. Fiscal Affairs Department, issuing body.
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| ISBN: | 1283512866
9781283512862
9781451906752
1451906757
1462311490
9781462311491
1452720908
9781452720906
9786613825315
661382531X
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| Notes: | "June 2005."
Includes bibliographical references (page 19).
English.
Online resource; title from title screen (viewed on October 15, 2013).
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| Summary: | The paper presents a simple model for discussing the effects of deficit limits and budget rules on fiscal policy. I find that limits on deficit-output ratios provide incentives to implement procyclical policies when the economy is in intermediate states, and countercyclical policies only in very "good" and very "bad" economic times. As a result, fiscal "reaction functions" are not monotonically related to the state of the economy. Deficit limits are found to exert discipline only provided the limit is tight and the expected sanction large, albeit at a relatively large welfare cost. Moreover, when fiscal choices are made under a veil of ignorance about the output gap, an increase in volatility is likely to raise the level of the budget deficit. Finally, concerning the design of fiscal frameworks, when excessive deficits arise from a political bias, deficit limits should be symmetric and not state-contingent
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| Other form: | Print version: Manasse, Paolo. Deficit limits, budget rules, and fiscal policy. [Washington, D.C.] : International Monetary Fund, Fiscal Affairs Dept., 2005
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