Showing papers on "Golden Rule (fiscal policy) published in 2006"

ABC's, 123's, and the Golden Rule: The Pacifying Effect of Education on Civil War, 1980–1999

Abstract: This study examines two ways by which education might affect the probability of civil war onset. First, educational investment provides a strong signal to the people that the government is attempting to improve their lives, which is apt to lower grievances, even in desperate times. Second, education can generate economic, political, and social stability by giving people tools with which they can resolve disputes peacefully, making them less likely to incur the risks involved in joining a rebellion. This theory is tested by examining the effect of educational expenditures, enrollment levels, and literacy rates on the probability of civil war onset from 1980 through 1999. The results provide evidence for both the grievance and stability arguments, providing strong support for the pacifying effects of education on civil war.

Politics and Efficiency of Separating Capital and Ordinary Government Budgets

Abstract: We analyze a "golden rule" that separates capital and ordinary account budgets and allows a government to finance only capital items with debt. Many national governments followed this rule in the eighteenth and nineteenth centuries, and most U. S. states do today. We study an overlapping-generations economy where majorities choose durable and nondurable public goods in each period. When demographics imply even moderate departures from Ricardian equivalence, the golden rule substantially improves efficiency. Examples calibrated to U. S. demographics show greater improvements at the state level or with nineteenth century demographics than under current national demographics.

"Life" is Our Ultimate Customer: From Lean to Sustainability

Abstract: 1. In spite of our best efforts, the U.S. economy as a whole is massively inefficient. Only six percent of materials actually end up in products.1 Total wastes in the United States, excluding wastewater, now exceed 50 trillion pounds per year.2 2. Short-term financial returns always trump longer-term issues such as caring for the environment and social wellbeing until the long term suddenly becomes short term — like Hurricane Katrina. Then our short sightedness becomes glaringly obvious. We must start becoming serious about our environment and society in order to sustain our companies, our nation, and our world. The irony and tragedy inherent in this situation is that most decisionmakers assume that sustainability has a low financial return. In reality, sustainability can return its investment within 6-to-12 months, enabling a company to justify the investment on a purely shortterm economic standpoint. Sustainability is "meeting the needs of the current generation without compromising the ability of future generations to meet their needs."3 It's the Golden Rule applied across generations. Lean leads us toward sustainability initiatives. Lean tools apply to any kind of problem, including environmental ones. The lean mantra of eliminating waste fits sustainability initiatives perfectly. Because it is much like lean both in concept and practice, sustainability can be thought of as lean extended to a much broader objective. Sustainability (like lean) has a good track record of improving company finances because of the emphasis on eliminating waste and the substantial increase in creativity by employees at all levels. For example, Timberland, which is trying to "use the resources, energy, and profits of a publicly traded footwear-and-apparel company to combat social ills, help the environ-

Abandoning the Golden Rule: the problem with "putting ourselves in the patient's place".

Abstract: A large body of evidence documents the difficulties health care professionals have in predicting their patient's beliefs or wishes. These difficulties extend from the predictions of very specific patient wishes (such as for life-sustaining therapies) to more global assessments of patients' lives as a whole (for instance, their quality of life). Although many explanations have been offered for this phenomenon, we discuss one that has not received as much attention: the conscious or unconscious adoption of what we refer to as Golden Rule thinking. This refers to our attempts to understand another person's situation by imagining what we would believe or want under similar circumstances, in other words, "putting ourselves in the patient's place." Although Golden Rule thinking would seem to be a promising strategy, studies show that it actually results in inaccurate predictions of patients' wishes or beliefs. These mispredictions, in turn, have significant clinical and ethical implications. We review possible reasons why Golden Rule thinking may be of limited utility in understanding our patients' situations and suggest alternate strategies to maximize our understanding of our patient's lives.

Estimating the impact of public investment for the united kingdom: has the golden rule of public finance made a difference? ♣

Abstract: This paper uses a SVAR methodology to investigate the effects of public investment on growth, and more specifically, the effects of the introduction of a golden rule. We extend the existing literature by estimating a model of the British economy that takes into account long run factors. This seems necessary when dealing with a multi annual variable like public investment, and its long term effects on public finances through debt accumulation. We find that in such a long run framework investment has significant and permanent positive effects on GDP growth; this result runs counter to most recent literature on the topic, that was limited to a short run specification. We further find, by comparing different subsamples, that the introduction of the golden rule in 1997 strengthened this positive effect of public investment.

Is Public Capital Productive in Europe

Abstract: This paper addresses the issue of whether and by how much public investment or public capital can enhance economic performance. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A VAR model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are therefore estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a “golden rule of public finance” in EMU is legitimate.

The Net Worth Approach to Fiscal Analysis: Dynamics and Rules

Abstract: The net worth approach to fiscal analysis is cast in a simple model able to capture the dynamics and steady-state equilibria of public sector's debt, nonfinancial and financial assets, and net worth under alternative fiscal rules, including the golden rule and the golden rule cum debt stabilization fund. The paper also presents an adaptation of the model to the case of economies with depletable resources that have introduced investment oil funds, and illustrates the fiscal conditions required for the solvency of the associated fiscal rules. The model brings to the forefront the rate of return of public assets, highlighting the need for policymakers to decide on the appropriate level of assets and debt ratios. Finally, the model's potential for use in a range of contexts is demonstrated with a simple numerical simulation.

Golden rule reference: Face-to-face and virtual

Abstract: Reference service in all types of libraries could be improved if librarians actively adopted the mindset of the Golden Rule. The Rule is expressed in some form in many world religions and instructs us to treat others how we would like to be treated. This approach has applicability not only in face-to-face reference transactions, but also in virtual reference. The empathetic reference librarian should be alert to both verbal and non-verbal clues that can indicate how a patron would like to be treated.

The Role of Fiscal Indicators in Setting Fiscal Policy in the UK

Abstract: Woods examines the role of fiscal indicators in the UK fiscal policy framework This includes the golden rule and the sustainable investment rule, requiring public sector net debt as a proportion of GDP to be held at a stable and prudent level over the economic cycle Woods considers the wide range of fiscal indicators used to underpin fiscal decisions Backward-looking indicators provide a measure of how successful the government has been in meeting its objectives; projections of the key fiscal indicators can guide fiscal strategy over the medium and long term The indicators help the government in setting its fiscal policy and provide the public with the evidence required to evaluate government policies Woods gives a detailed explanation of the approach used to cyclically adjust key fiscal balances and the indicators used in analyzing the longer-term fiscal position, including issues of long-term fiscal sustainability and inter-generational fairness Finally, the paper considers how the various indicators are used in formulating the government’s fiscal strategy

Is Public Capital Productive in Europe

Abstract: This paper addresses the issue of whether and by how much public investment or public capital can enhance economic performance. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A VAR model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are therefore estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a "golden rule of public finance" in EMU is legitimate.

Incentives for public investment under fiscal rules

Abstract: The authors explore the relationship between fiscal rules and capital budgeting. The current budgetary approach to limit deficits to a fixed portion of GDP or to balance budgets could undermine incentives to invest in public capital with long-run returns since politicians concerned about electoral prospects would favor expenditures providing immediate benefits to their voters. An alternative budgetary approach is to separate capital from current revenues and expenditures and relax fiscal constraints by allowing governments to finance capital expenditures with debt, as suggested by the golden rule approach to capital funding. But the effect of capital budgeting would be to provide opportunities to politicians to escape the fiscal rule constraints by shifting current expenditures into capital accounts that are difficult to measure properly, thereby leading to increased borrowing. As an alternative, the authors propose a modified golden rule limiting debt finance to a proportion of the government's investment in self-liquidating assets.

EMU's Fiscal Rules and Economic Stabilization

Abstract: This paper proposes a quantitative comparison of EMU's different fiscal rules, i.e., the stability and growth Pact, the structural deficit rule and the golden rule. From comparing the economic stabilizing effects of each rule, it concludes that the Pact is not the perfect solution.

Prudence and UK Trend Growth

Abstract: Trend GDP growth has assumed an importance in the public debate not least because the decomposition of GDP into trend and cyclical components lies at the heart of the 'Golden Rule'. This rule states that the Government should only borrow to invest over the economic cycle. Furthermore, over the medium term the public finances are projected using Treasury estimates of trend GDP growth. Trend growth estimates are therefore central to discussions about the sustainability of the public finances (see HM Treasury, 1999a).

A Blueprint for Optimal Intertemporal Consumption Under Environmental Constraints: The Modified Green Golden Rule

Abstract: The notion of sustainability represents the core of the theoretical and political debate on the potential conflict between economic growth and environmental quality. A clear definition of what sustainability means, although still controversial, is indeed a possible keystone to better understanding what is Environmental Economics needed for. To this end, this paper aims at providing a theoretical analysis by means of a neo-classical framework, and consequently define a modified version of the common green golden rule that an economy might follow to drive the system onto the path where both optimal intertemporal consumption and sustainable growth are finally reconciled.

Estimating the impact of public investment in the united Kingdom: Has the Golden Rule of Public Finance Made a Difference ?

Abstract: This paper uses a SVAR methodology to investigate the effects of public investment on growth, and more specifically, the effects of the introduction of a golden rule. We extend the existing literature by estimating a model of the British economy that takes into account long run factors. This seems necessary when dealing with a multi annual variable like public investment, and its long term effects on public finances through debt accumulation. We find that in such a long run framework investment has significant and permanent positive effects on GDP growth; this result runs counter to most recent literature on the topic, that was limited to a short run specification. We further find, by comparing different subsamples, that the introduction of the golden rule in 1997 strengthened this positive effect of public investment.

Règles Budgétaires et Gestion du Policy-Mix dans l'UEM Budgetary Rules and Management of the Policy-Mix in the UME

Abstract: This papper proposes a comparison of EMU's different fisca rules, i.e. the stability and growth Pact, the structural deficit rule and the golden rule. From comparing the economic stabilizing effects and their consistency with the monetaty policy, it concludes that the Pact is better in the case of a supply shock, and the golden rule is better in the case of a demand shock

WTO casts a shadow over Nepal’s natural legacy

Abstract: Can’t live with it, can’t live without it. Confused? The golden rule: Economic priorities should not be allowed to outweigh environmental imperatives Him J Sci 1(2): 72, 2003 The full text is of this article is available at the Himalayan Journal of Sciences website

Sub-National Optimal Budget Allocation and Borrowing under Soft Budget Constraint

Abstract: Local governments have borrowed largely from the banking system to finance their deficits instead of responding to the rigors of bond markets. This paper analizes how sub-national governments optimally reallocate the provision of public goods and decide on borrowing, in a model where the banking system faces a soft budget constraint. In contrast with recent literature, sub-national governments allocate a higher (lower) than optimal amount of resources to consumption public goods (infrastructure investment) and overborrow if they expect the banking system to be bailed out. Controls on sub-national borrowing like the golden rule seem to be inefficient to avoid excesive indebtedness at state level.

The New Member States and the Stability and Growth Pact: needs for adapting in the prospect of euro area membership?

Abstract: The New Member States (NMS) have to comply with the Stability and Growth Pact (SGP) rules: public deficits below 3% of GDP and public debts below 60% of GDP, although they cannot be subject to fines as long as they are not members of the euro area. Most of the NMS currently run higher than 3% of GDP deficits but lower than 60% of GDP debts. The implementation of the surveillance procedures had led 6 of the 12 NMS to be under an excessive deficit procedure (EDP) soon after they joined the EU. Are the SGP rules adequate for the NMS? The SGP rules were not designed for catching-up countries, but for ‘old member States’. In particular, the initial rules of the SGP did not account for investment needs. A Golden rule for public finances would be especially appropriate for the NMS, since it would allow them to borrow to finance investment needs that will benefit not only current but also future generations. We argue that SGP rules are not adapted for the NMS and that better rules should be introduced in the prospect of euro area enlargement. Section 1 provides a brief assessment of the current situation of public finance criteria in the NMS. Section 2 considers the rationale of SGP framework for the NMS. Section 3 advocates for a better fiscal rule: the golden rule. Section 4 concludes. 1. The current macroeconomic context 1.1. The NMS and SGP requirements: 3% of GDP deficits and 60% of GDP public debts 6 of the 12 NMS that joined the EU in May 2004 had to face an EDP as soon as from July 2004: the Czech Republic, Hungary, Malta, Cyprus, Slovakia and Poland. The EDP was initiated because of higher than 3% of GDP deficits. Contrary to euro area countries currently under an EDP, the NMS currently running higher than 3% of GDP deficits also run low debts (see Table 1). Since several member states were allowed to join the euro area despite higher than 60% of GDP debt levels (Belgium, Greece, Italy), the debt criteria has in practice been ‘forgotten’, although it is the relevant criteria in terms of default risk in a monetary union (but 60% is certainly not the adequate level). Hence, some EU-15 countries (like Belgium) do not face any EDP since they run low deficits together with well above 60% of GDP public debts, while NMS are de facto in the worst position as concerns the implementation of Maastricht fiscal criteria: they are accused of running excessive deficits and requested to bring them below 3% of GDP, although theyndo not raise any default risk in terms of public debt. This illustrates once again the lack of rationale of the SGP fiscal rules.