Showing papers on "Golden Rule (fiscal policy) published in 2014"
Posted Content•
TL;DR: This article proposed a unifying theory of forecasting in the form of a Golden Rule of Forecasting, which is to be conservative, seek all knowledge relevant to the problem, and use methods that have been validated for the situation.
Abstract: This paper proposes a unifying theory of forecasting in the form of a Golden Rule of Forecasting. The Golden Rule is to be conservative. A conservative forecast is consistent with cumulative knowledge about the present and the past. To be conservative, forecasters must seek all knowledge relevant to the problem, and use methods that have been validated for the situation. A checklist of 28 guidelines is provided to implement the Golden Rule. This article’s review of research found 150 experimental comparisons; all supported the guidelines. The average error reduction from following a single guideline (compared to common practice) was 28 percent. The Golden Rule Checklist helps forecasters to forecast more accurately, especially when the situation is uncertain and complex, and when bias is likely. Non-experts who know the Golden Rule can identify dubious forecasts quickly and inexpensively. To date, ignorance of research findings, bias, sophisticated statistical procedures, and the proliferation of big data have led forecasters to violate the Golden Rule. As a result, despite major advances in forecasting methods, evidence that forecasting practice has improved over the past half-century is lacking.
82 citations
TL;DR: In this article, the authors highlight the importance of debt-related fiscal rules and derive growth-maximizing public debt ratios from a simple theoretical model based on evidence on the productivity of public capital, and estimate public debt targets that governments should maintain if they wish to maximize growth for panels of OECD, EU and euro area countries.
Abstract: This article highlights the importance of debt-related fiscal rules and derives growth-maximizing public debt ratios from a simple theoretical model. On the basis of evidence on the productivity of public capital, we estimate public debt targets that governments should maintain if they wish to maximize growth for panels of OECD, EU and euro area countries. These are not arbitrary numbers, but are founded on long-run optimizing behaviour assuming that governments implement the golden rule of financing; that is, they contract debt only to finance public investment. Our estimates suggest that the euro area should target debt levels of around 50% of GDP if member states are to have common targets. That is about 15% points lower than the estimate for the growth-maximizing debt ratio in our OECD sample and comfortably within the Stability and Growth Pact’s debt ceiling of 60% of GDP. We also indicate how forward-looking budget reaction functions fit into a debt targeting framework.
72 citations
TL;DR: In this paper, the concept of the golden rule is analyzed, viewing it as a formula of conduct that most completely embodies the distinctiveness of morality, and considering the rule's humanitarian significance and current relevance.
Abstract: The author analyzes the concept of the golden rule, viewing it as a formula of conduct that most completely embodies the distinctiveness of morality. He shows the difference between the golden rule and Kant's categorical imperative and considers the rule's humanitarian significance and current relevance.
10 citations
01 Feb 2014
TL;DR: The long-term decline in gross public investment in European Union countries mirrors the trend in other advanced economies, but recent developments have been different: public investment has increased elsewhere, but in the EU it has declined and even collapsed in the most vulnerable countries, exaggerating the output fall as mentioned in this paper.
Abstract: The long-term decline in gross public investment in European Union countries mirrors the trend in other advanced economies, but recent developments have been different: public investment has increased elsewhere, but in the EU it has declined and even collapsed in the most vulnerable countries, exaggerating the output fall.
The provisions in the EU fiscal framework to support public investment are very weak.The recently inserted ‘investment clause’ is almost no help. In the short term, exclusion of national co-funding of EU-supported investments from the fiscal indicators considered in the Stability and Growth Pact would be sensible.
In the medium term, the EU fiscal framework should be extended with an asymmetric ‘golden rule’ to further protect public investment in bad times, while limiting adverse incentives in good times. During a downturn, a European investment programme is needed and the European Semester should encourage greater investment by member states with healthy public finances and low public investment rates. Reform and harmonisation of budgeting, accounting, transparency and project assessment is also needed to improve the quality of public investment.
9 citations
8 citations
Posted Content•
TL;DR: In this article, a new macroeconomic model is presented, which makes it possible to take a fresh look both at the long-term equilibrium growth process and at short-term deviations from it.
Abstract: A new macroeconomic model is presented, which makes it possible to take a fresh look both at the long-term equilibrium growth process and at short-term deviations from it. Its key hypothesis is investment-to-profits equality. This hypothesis has classical roots and corresponds to the Ricardian and Marx approach and coincides with Phelps’ Golden Rule of capital accumulation as well as with Uzawa’s classical hypothesis. Under this assumption the long-term output growth rate is determined by the rate of capital accumulation, which in turn is equal to the net profit rate. The profit rate value is the result of a trade-off between workers and proprietors. The relationship between aggregate output and inputs is analytically derived in this paper where the variable values are measured not in physical units, but in the current monetary cost. It has the Cobb-Douglas functional form but is neither neoclassical production function nor technical relationship, which could specify the maximum output obtainable from a given set of inputs. The exponent of capital in the resulting function is equal to the investment rate, whose current value is not constant in time. So the output is no longer an unalterable function of inputs, and its shape can vary. The ‘production function’ shift parameter, which is commonly associated with the level of technology, may be expressed in terms of the wage level. The reasons for the 2007–2008 global recession have been clarified.
6 citations
TL;DR: In this paper, the authors analyze the public debt in the EU member states based on the "golden rule" of state indebtedness and reveal an inverse relationship between public debt and public investments.
Abstract: Q e purpose of this paper is to analyze the public debt in the EU member coun- tries based on the "golden rule" of state indebtedness. Q is study analyzes the type of relationships that exist in the European Union (EU27) in the period 2008-2012, between the level of the public debt and: public investments, unemployment rate and economic growth in order to identify the destinations and e( ects of the public debt that represent pillars in the analysis of its sustainability. Q e analysis revealed an inverse relationship between public debt and public investments, thus increasing the public debt is not listed in stimulating public investments, but on the contrary it can be noticed their decline.
5 citations
TL;DR: In this article, a Golden Formula, which does not depend on the specification of production and preference functions, is established to reveal that time-average of the growth rate of optimal capital accumulation will converge to a constant, which is endogenously determined by relevant parameters.
Abstract: In the paper, a Golden Formula, which does not depend on the specification of production and preference functions, is established to reveal that time-average of the growth rate of optimal capital accumulation will converge to a constant, which is endogenously determined by relevant parameters, almost surely. The Golden Formula naturally implies surprisingly interesting and also intrinsic economic relations between some important macroeconomic variables; for example, it serves as a direct bridge between the modified Golden Rule and the modified Ramsey Rule. Furthermore, it indeed subsumes and hence substantially extends the classical Golden Rule in deterministic theory.
5 citations
TL;DR: This paper argued that many of the so-called financial innovations turn out to be little more than old snake oil repackaged into new bottles, which obfuscate their true nature and tempt investors to forget the golden rule of investing: No asset (or strategy) is so good that you should invest irrespective of the price paid.
Abstract: Modern day investment management seems to closely resemble ancient alchemy. The latter promised to turn lead into gold, whereas the former keeps promising to turn low returns into high returns. However, many of the so-called financial innovations turn out to be little more than old snake oil repackaged into new bottles. They obfuscate their true nature and tempt investors to forget the golden rule of investing: No asset (or strategy) is so good that you should invest irrespective of the price paid.
5 citations
3 citations
01 Jan 2014
TL;DR: In this article, the authors examine the movements of a system over time, examining the microeconomic and macroeconomic adjustment processes, and find that a non-stationary equilibrium can be found in the second half of this century.
Abstract: In dynamic analysis, we examine the movements of a system over time. From the infancy of their science, economists were interested in the microeconomic and macroeconomic adjustment processes. As for long-term trends, classical economists assumed that would tend towards a stationary state. Modern growth theory, as developed in the second half of this century, indicated the possibility of a non-stationary equilibrium and provided strong impetus to appropriate and adopt for study of economic dynamics the mathematical tools developed in physical sciences.
01 Jan 2014
Posted Content•
TL;DR: It is found that the optimal level of life-extending health care expenditures should increase with rising productivity and retirement age, while the effects of improvement in medical technology are ambiguous.
Abstract: We derive a golden rule for the level of health care expenditures and find that the optimal level of life-extending health care expenditures should increase with rising productivity and retirement age, while the effects of improvement in medical technology are ambiguous.
Journal Article•
Book•
29 Aug 2014
TL;DR: Cooperation for Mutual Advantage - Conditions of Cooperation and Investment in the Conditions as discussed by the authors, is another example of cooperation for mutual advantage, but with a different emphasis on the mutual advantage.
Abstract: Cooperation for Mutual Advantage.- Conditions of Cooperation.- Investment in the Conditions.
TL;DR: Our century so far suffers from the so-called Golden Paradox: precisely when the world needs the "golden rule" the most, it is less available than usual as discussed by the authors.
Abstract: Our century so far suffers from the “Golden Paradox.” Precisely when the world needs the “Golden Rule” the most, it is less available. Every major faith tradition has a “Golden Rule,” yet social an...
Posted Content•
TL;DR: In this article, a Golden Formula, which does not depend on the specification of production and preference functions, is established to reveal that time-average of the growth rate of optimal capital accumulation will converge to a constant, which is endogenously determined by relevant parameters.
Abstract: In the paper, a Golden Formula, which does not depend on the specification of production and preference functions, is established to reveal that time-average of the growth rate of optimal capital accumulation will converge to a constant, which is endogenously determined by relevant parameters, almost surely. The Golden Formula naturally implies surprisingly interesting and also intrinsic economic relations between some important macroeconomic variables; for example, it serves as a direct bridge between the modified Golden Rule and the modified Ramsey Rule. Furthermore, it indeed subsumes and hence substantially extends the classical Golden Rule in deterministic theory.
01 Jan 2014
TL;DR: Cathy as discussed by the authors revealed three underlying principles that collectively form a frame of reference which guides the decision-making of this successful leader of Chick-fil-A. These three principles are: golden rule philosophy, a remarkable work ethic, and consistent convictions.
Abstract: A personal interview with Truett Cathy reveals three underlying principles that collectively form a frame of reference which guides the decision-making of this successful leader of Chick-fil-A. These three principles are: golden rule philosophy, a remarkable work ethic, and consistent convictions. These principles are inherent in the organization’s stated corporate purpose: To glorify God by being a faithful steward of all that is entrusted to us. To have a positive influence on all who come in contact with Chick-fil-A.
Posted Content•
TL;DR: In this paper, the effect of accepting more immigrants on welfare in the presence of a pay-as-you-go social security system is analyzed theoretically and quantitatively, and it is shown that if initially there exist intergenerational government transfers from the young to the old, the government can lead an economy to the (modified) golden rule level within a finite time in a Pareto improving way by increasing the percentage of immigrants to natives (PITN).
Abstract: The effect of accepting more immigrants on welfare in the presence of a pay-as-you-go social security system is analyzed theoretically and quantitatively. First, it is shown that if initially there exist intergenerational government transfers from the young to the old, the government can lead an economy to the (modified) golden rule level within a finite time in a Pareto-improving way by increasing the percentage of immigrants to natives (PITN). Second, using the computational overlapping generation model, I calculate both the welfare gain of increasing the PITN from 15.5 percent to 25.5 percent and years needed to reach the (modified) golden rule level in a Pareto-improving way in a model economy. The simulation shows that the present value of the Pareto-improving welfare gain of increasing the PITN comprises 23 percent of the initial GDP. It takes 112 years for the model economy to reach the golden rule level in a Pareto-improving way.
TL;DR: In this article, the effect of accepting more immigrants on welfare in the presence of a pay-as-you-go social security system is analyzed qualitatively and quantitatively, and it is shown that if initially there exist intergenerational government transfers from the young to the old, the government can lead an economy to the (modified) golden rule level within a finite time in a Pareto improving way by increasing the percentage of immigrants to natives (PITN).
Abstract: The effect of accepting more immigrants on welfare in the presence of a pay-as-you-go social security system is analyzed qualitatively and quantitatively. First, it is shown that if initially there exist intergenerational government transfers from the young to the old, the government can lead an economy to the (modified) golden rule level within a finite time in a Pareto-improving way by increasing the percentage of immigrants to natives (PITN). Second, using the computational overlapping generation model, the welfare gain is calculated of increasing the PITN from 15.5 percent to 25.5 percent and years needed to reach the (modified) golden rule level in a Pareto-improving way in a model economy. The simulation shows that the present value of the welfare gain of increasing the PITN comprises 23 percent of the initial GDP. It takes 112 years for the model economy to reach the golden rule level in a Pareto-improving way.