Showing papers on "Golden Rule (fiscal policy) published in 2002"

Patching up the Pact: some Suggestions for Enhancing Fiscal Sustainability and Macroeconomic Stability in an Enlarged European Union

Abstract: The paper considers the implications for the EU accession candidates of Central and Eastern Europe of the fiscal-financial constraints imposed by the Stability and Growth Pact and the Maastricht Treaty. Our findings apply also to those current EU members whose initial conditions (e.g. infrastructure and progress in state pension reform) or other structural characteristics (e.g. demographic structure, growth potential, Balassa-Samuelson equilibrium real exchange rate appreciation) differ significantly from the EU average. We find the existing criteria to be seriously flawed and propose an alternative rule, the Permanent Balance Rule, based on a strong from of tax smoothing.

Is there a Golden Rule for the Stochastic Solow Growth Model

Abstract: This paper analyzes the dependence of average consumption on the saving rate in a one-sector neoclassical Solow growth model with production shocks and stochastic rates of population growth and depreciation where arbitrary ergodic processes are considered. The long-run behavior of the stochastic capital intensity and hence average consumption is uniquely determined by a random fixed point which depends continuously on the saving rate. We prove existence of a golden rule saving rate maximizing average consumption per capita. A dynamic inefficiency result is given to ascertain the importance of the golden rule for the stochastic Solow model. The cases of Cobb-Douglas and CES production function are analyzed numerically, revealing that shocks to either parameter can lead to higher average consumption at the golden rule saving rate.

Fiscal Targets, Automatic Stabilisers and their Effects on Output

Abstract: We investigate the risk that the Stability and Growth Pact may act as a constraint on the fiscal policy of EMU Member States in three respects: a) discretionary counter-cyclical policy which finds a limit in the 3 per cent of GDP threshold set for nominal deficit; b) automatic stabilisers whose extent may have to be limited both during the transition to the medium term objective of a budgetary position of close to balance or in surplus, and in the steady state, for countries with strong stabilisers where a high structural surplus may be needed to comply with the 3 per cent threshold; c) public investment, given that there is no provision for a golden rule within the EMU fiscal framework. We argue in favour of a revision of the fiscal target set in the Pact of a medium-term position of close to balance or in surplus. They stress the benefits in terms of growth from public borrowing to finance public investment and they point out that a one per cent of GDP deficit over the cycle should still be compatible with the 3 per cent threshold for the annual nominal deficit.

Accrual Accounting and Australian Fiscal Policy

Abstract: Australian governments have recently moved from cash accounting to accrual accounting. Accrual accounting has been accompanied at the national government level by the introduction of a new key fiscal policy measure: the ‘fiscal balance’. This paper explains and evaluates this new fiscal measure. It concludes that, given the present fiscal policy of the Australian government, fiscal balance is a superior fiscal policy measure to the ‘cash’ budget balance measure which it replaced. However, from the alternative ‘golden rule’ policy standpoint, fiscal balance is not a meaningful fiscal policy measure — although its stock counterpart, net financial liabilities, certainly is.

Confucius: The Golden Rule

Abstract: Manufacturing ConfucianismThe Philosophy of Human NatureConfucianismThe Golden RuleThe Analects of ConfuciusConfuciusThe Essential AnalectsEleanor RooseveltThe Golden RuleThe Universal Golden RulePhilosophy of ConfuciusLife, Liberty, and the Pursuit of DaoConfuciusThe Golden RuleThe Kindness of StrangersThinking Through ConfuciusConfuciusThe Case for GodThe Ways of ConfucianismOnenessThe Wars of the LordLincolnFreedom and ReasonThe Great TransformationThe Age of Confucian RuleThe Ethics of ConfuciusConfuciusBoston ConfucianismThe Jesuit Reading of ConfuciusThe Wright BrothersLilaReadings from the Ancient Near EastThe Golden RuleAnother Gospel?Ethics and the Golden RuleTwelve Steps to a Compassionate LifeWe Are Not in the WorldUniversalizabilityI Am ConfuciusEastern Wisdom

Cyclical and Structural Deficits on the Road to Accession: Fiscal Rules for an Enlarged European Union

Abstract: The Paper is one of the first attempts to compute cyclical and structural deficits for a set of countries candidate to accession to the EU. Three main results are derived: first, the high deficits observed in candidate countries in recent years have a structural nature. Second, the fiscal stance has been pro-cyclical in candidate countries. Finally, because of higher volatility of output in these countries, the risks of surpassing the 3% budget limit that applies to all members of the EU are much higher for them. Without changing existing rules in the European Union, it is likely that candidate countries will have to undertake costly and inefficient adjustments of the last minute. Recent proposals by the European Commission would improve matters for candidate countries, without however solving some of their major potential difficulties. The Paper suggests a new fiscal rule for an enlarged European Union, which is consistent with the philosophy of the Stability and growth Pact but focuses on ex ante limits to expenditure. Such a rule would imply that in periods of growth above trend, countries are forced to run budget surplus, while in periods of economic slack they will run deficits. The rule is fully consistent with the theory of optimal tax smoothing and would, at the same time, strengthen fiscal discipline.

Entrepreneurial Leadership Styles: What Works and What Doesn't

Abstract: Many entrepreneurs claim to use common sense as their management philosophy. An example is the Golden Rule as a managerial guide for personnel decisions. Since this adage was never meant as a management philosophy, but as a statement of respect and concern for others, it may be inappropriate. Employees want to be understood as unique individuals and as such, they respond to different supervisory methods than entrepreneurs might assume. Entrepreneurs must realize that what works to motivate one employee may not work well with other employees. Examples of effective methods and the principles on which they are based are provided. INTRODUCTION Entrepreneurs have many options when deciding how to provide leadership. Some leadership styles are more successful than others and which is which is well documented though not always well understood, disseminated, or utilized. Common sense is sometimes claimed to be the leadership style of choice. Unfortunately, common sense does not always provide the best direction. An oriental fable dramatizes the negative consequences of following common sense, i.e treating others as we would like to be treated. Once upon a time, there was a great flood; and involved in this flood were two creatures, a monkey and a fish. The monkey, being agile and experienced, was lucky enough to scramble up a tree and escape the raging waters. As he looked down from his safe perch, he saw the poor fish struggling against the swift current. With the very best of intentions, he reached down and lifted the fish from the water. The result was inevitable (Adams, 1969, p. 22). Just as the monkey assumed that the fish's needs were similar to its own and behaved accordingly, so do many entrepreneurs assume that their employees think, feel, and want to be treated as they do. Such well-intentioned behavior frequently results in similarly unfortunate circumstances. Let us move from an old tale to a current scenario: An owner of a small e-commerce business was being interviewed by a local newspaper official. The reporter asked him about his philosophy of management. The owner responded, "I just trust my gut and go by the Golden Rule, treating others the way I would want them to treat me." The intent of people like this owner is admirable yet "the trick is not to learn to trust ... gut feelings, but rather to discipline yourself to ignore them" (Lynch, 1997, p. 419). In this case the Golden Rule is touted as a rationale for relying on common sense. The Golden Rule is used in a way not intended, i.e. as a management philosophy. Many entrepreneurs believe the Golden Rule is the ideal principle for guiding management practice (e.g. Manz, 1998; Schonfeld, 1994). However, difficulties arise when we use ourselves as the measure of how to treat others (Perreault, 1996), assuming we understand their perspectives, rather than assessing those perspectives. Treating others as we wish to be treated is based on one's own wants, needs, and perceptions, which does not take into account others' perspectives and preferences. Such an approach implies that entrepreneurs use themselves as models for understanding how to manage people. A corollary is that entrepreneurs treat employees the way they themselves want to be treated. "Our tendency is to project out of our own autobiographies what we think other people want or need. We project our intentions on the behavior of others" (Covey, 1989, p. 192). Often, however, employees do not want to be treated as their employer would like, but respond to different methods (Hill, 1992). Hence, using the Golden Rule is not an appropriate model for entrepreneurs. Given these considerations, the management philosophy of the e-commerce business owner discussed above may be problematic. WHAT CAN GO WRONG How can such an ingrained, common sense adage, one of the oldest ethical maxims (Matthew 7:12, 1979), not be the best way to manage people? …

Budget Perspectives 2003

Abstract: Forecasting the Public Finances and the Macroeconomic Context for Budget 2003: by Adele Bergin, David Duffy, John Eakins & Daniel McCoy This first paper outlines the macroeconomic context in which the Budget is set and attempts to discern the appropriate fiscal stance for 2003. The authors see the medium-term outlook for the Irish economy as broadly favourable despite significant threats from sustained cost pressures and potential appreciation of the euro. The short-term prospects are, however, quite uncertain. They highlight the difficulties that have recently been encountered in predicting trends in the public finances with expenditures exceeding, and revenues falling short of, expected levels. They also emphasise the generally pro-cyclical character of Irish fiscal policy. In these circumstances, they advocate a cautious approach to the 2003 budget avoiding major innovations on either the revenue or expenditure side and aiming for a neutral budgetary stance. The UK Government's Approach to Setting Fiscal Policy Carl Emmerson, Christine Frayne This paper outlines the experience in the UK with its Code of Fiscal Stability. This is encapsulated in two rules which are designed to help achieve high and stable levels of growth and employment. The golden rule enjoins Government to borrow only to finance investment and not consumption and the sustainable investment rule aims to keep net public sector debt at a stable and prudent level, currently 40 per cent. The authors discuss the experience with applying these rules and emphasise the problems that can be caused by forecasting errors. It will be interesting to hear the views of the Conference on the advisability of introducing such explicit rules into the Irish budgetary process, particularly since strict adherence to the rules of the EU's Stability and Growth Pact would lead to even more restrictive borrowing policies than under the UK system. The Distributive Impact of Budgetary Policy: A Medium-Term View by Tim Callan, Mary Keeney & John Walsh In the third paper, the authors use the ESRI's SWITCH model to assess the impact of tax and welfare policy on the Irish income disruption over the past 20 years or so. They show that a variety of factors have influenced this impact including macroeconomic circumstances such as the speed with which the economy is growing and the provisions of the various partnership agreements as well as political choices. They find that during the recent spurt in growth, budgetary policy acted to reinforce income gains for higher income groups while involving losses for those in lower income categories. The results for earlier periods were less clearcut. This paper shows the usefulness of having a resource like the SWITCH model which allows us to determine accurately what the distributional effects of policy are. Without it, policy-makers would be flying blind, unsure of who was being affected and to what extent. Setting the Appropriate Tax on Cigarettes in Ireland by David Madden In the fourth session, the author discusses the issues involved in the taxation of tobacco in general and in Ireland in particular. His paper compares current levels of taxation in Ireland with those in other European countries and goes on to identify the economic factors which should be taken into account when setting the appropriate level of taxation for tobacco. The paper draws an important distinction between the external and the internal costs of smoking. The former refers essentially to the costs imposed by smokers on others, while the latter refers to the costs smokers impose on themselves. If it can be shown that smokers do not take the internal costs fully into account, then considerably higher levels of taxation can be justified. The paper also discusses a variety of other topics, such as the choice between specific and ad valorem taxes and the role of smuggling in the tobacco market. There has been considerable discussion in the media recently about the advisability of a sharp increase in the tax on tobacco. This paper provides invaluable background analysis to this debate.

E-Commerce: The Dark Side: The Golden Rule?

Abstract: There is an old saying that turns the Golden Rule - do unto others as you would have them do to you - into a more cynical commentary on the human condition: Who has the Gold makes the Rules!

Greening the Neoclassical Optimal Economic Growth Model

Abstract: A no-arbitrage rule of consumption and a golden rule of capital accumulation are derived under the assumptions that the satisfaction from consumption is spoiled by environmental degradation caused by industrialisation but moderated by cleaning up and greening operations.