Showing papers on "Golden Rule (fiscal policy) published in 2017"

When Keynes Goes to Brussels : a New Fiscal Rule for the EMU?

Abstract: The Economic and Monetary Union (EMU) institutions are consistent with a New Consensus that emerged in the 1980s, limiting the role for macroeconomic policy to short term stabilizations by means of rules. I will argue that the policy inertia induced by the Consensus may have played a role in the disappointing performance of EMU economies even before the crisis. The crisis of the Consensus, and the debate on secular stagnation, proved that Keynesian and possibly persistent excesses of savings over investment may hamper growth. This has put fiscal policy back to the center of the scene, and given the General Theory, at eighty, a second youth. I will argue therefore that the EMU fiscal rule should be amended to allow semi-permanent negative government savings. I will finally argue that a modified Golden Rule may serve this objective, and allow EU-wide policy coordination. This seems the only reasonable reform with some chances of being adopted by the EU divided policy makers.

Towards Golden Rule of Capital Accumulation: A Genetic Algorithm Approach

Abstract: The current study deals with maximizing consumption per worker in connection with the economic growth of society The traditional Solow model based approach is well-studied and computationally complex The present work proposes a Genetic Algorithm (GA) based consumption maximization in attaining the Golden rule An objective function derived from traditional Solow model based on depreciation rate and amount of accumulated capital is utilized The current study considered a constant output per worker to incorporate a constant efficiency level of labor Different ranges of Depreciation rate and accumulated capital are tested to check the stability of the proposed GA based optimization process The mean error and standard deviation in optimization process is utilized as a performance metric The experimental results suggested that GA is very fast and is able to produce economically significant result with an average mean error 0142% and standard deviation 0021%

Implementing the Modified Golden Rule? Optimal Ramsey Capital Taxation with Incomplete Markets Revisited

Abstract: What is the prescription of Ramsey capital taxation in the long run? Aiyagari (1995) addressed the question in a heterogeneous-agent incomplete-market (HAIM) economy, showing that a positive capital tax should be imposed to implement the so-called modified golden rule (MGR). This famous capital taxation result is built on a critical assumption that a Ramsey steady state (featuring the non-binding of the government’s natural debt limit)exists. This paper revisits and checks the validity of this critical assumption. We first show that an optimal Ramsey allocation may feature no steady state if the government’s natural debt limit never binds. Hence, the Ramsey steady state described and assumed by Aiyagari (1995) turns out to be incorrect. We further show that any steady state of the HAIM economy can be welfare-improved by issuing more government bonds to front-load consumption. The key to both results is embedded in the hallmark of the HAIM economy that the steady-state risk-free rate is lower than the time discount rate in competitive equilibrium. On the basis of our findings, we argue that the most likely long-run Ramsey outcome should feature the co-existence of a Ramsey steady state with (i) the binding of the government’s debt limit and (ii) the failure of the MGR.

Mathematical foundations of the Golden Rule. I. Static case

Abstract: The Berge equilibrium concept was suggested by Russian mathematician K. Vaisman in 1994. In this paper, we suggest to use this concept as a mathematical model of the Golden Rule. The Berge–Pareto equilibrium is formalized and sufficient conditions for the existence of the equilibrium are found. As a supplement, the existence of the mixed strategy equilibrium is proved.

How Asian countries understand policy experiment as policy pilots

Abstract: Policymaking based on the classical experimental design is regarded as a golden rule in the field of public policy. Despite the methodological superiority of randomized control experiment, the prac...

The simple dynamics of public debt with productive public goods

Abstract: This paper analyzes the dynamics of public debt in a simple two-period overlapping-generations model of endogenous growth with productive public goods. Alternative fiscal rules are defined, with particular attention devoted to the golden rule. Conditions under which multiple equilibria may emerge are characterized. The analysis is then extended to consider the case of partial depreciation, an endogenous risk premium, an endogenous primary surplus rule, a generalized golden rule, a nonseparable utility function, and network externalities. If network effects are sufficiently strong, an increase in public investment may shift the economy from a low-growth equilibrium to a steady state characterized by both higher public debt ratios and higher output growth. This shift may enhance welfare as well. These results illustrate the importance of preserving, even in a context of fiscal retrenchment, the allocation of resources to specific types of public investment.

"Revision of the Golden Rule": John Cage, Latin America, and the Poetics of Non-Interventionism

Abstract: Abstract: Non-interventionism was a guiding principle in Cold War era debates about the United States’ proper role in Latin American affairs, and it also serves as a paradigm for understanding inter-American cultural exchange during the period. The Latin American travels of composer, poet, and multimedia artist John Cage provide a means of exploring this. Cage’s writings about his visits to São Paulo and San Juan, as well as his correspondence with Latin American colleagues like Brazilian Poet Augusto de Campos, point to the ways in which Cage’s aesthetics of indeterminacy became a model for non-interventionist cultural diplomacy. This idealistic vision of hemispheric relations stands in stark contrast with the aggressive Cold War cultural policy initiatives that the US carried out throughout Latin America. However, as Cage’s reception at the 1985 Bienal de São Paulo indicates, non-interventionism’s manifestation as cultural practice became fraught in similar ways to its implementation as policy.

How well do subnational borrowing regulations work

Abstract: There are many positive things associated with subnational borrowing, including additional funding or promoting intergenerational equity. But it may also endanger fiscal sustainability and macro stability due to moral hazard and soft budget constraints. Thus borrowing controls are justified and also common. In this paper we review the different types of ex-ante and ex-post regulations used the international experience based on a large panel of developed and developing countries. Effectiveness or borrowing regulations in this paper is defined relative to the ability to preserve primary balances at the general government and subnational levels. There is a wide variety of both ex-ante and ex-post sub-national borrowing regulations that countries implement. Each has both advantages and disadvantages, with different suitability countries’ circumstances. For example, depth of financial markets is important when choosing market-based regulations. The presence of subnational tax autonomy contributes to an increase in the general government primary balance, but not significantly for subnational primary balances. A history of subnational bailouts is associated with lower primary balances on average at all levels. The “golden rule” (borrowing is only for capital investment purposes) and limits on debt and borrowing appear effective at all levels of government. However, we find that none of the broad types of sub-national borrowing regulations seem to have a distinct significant direct effect on the narrow definition of fiscal sustainability at the subnational level.

Optimal Ramsey Capital Income Taxation —A Reappraisal

Abstract: This paper addresses a long-standing problem in the optimal Ramsey capital taxation literature. The tractability of our model enables us to solve the Ramsey problem analytically along the entire transitional path. We show that the conventional wisdom on Ramsey tax policy and its underlying intuition and rationales do not hold in our model and may thus be misrepresented in the literature. We uncover a critical trade off for the Ramsey planner between aggregate allocative efficiency in terms of the modified golden rule and individual allocative efficiency in terms of self-insurance. Facing the trade off, the Ramsey planner prefers issuing debt rather than taxing capital if possible. In particular, the planner always intends to supply enough bonds to relax individuals' borrowing constraints and through which to achieve the modified golden rule by crowding out capital. Capital tax is not the vital tool to achieve aggregate allocative efficiency despite possible over-accumulation of capital. Thus the optimal capital tax can be zero, positive, or even negative, depending on the Ramsey planner's ability to issue debt. The modified golden rule can fail to hold whenever the government encounters a debt limit. Finally, the desire to relax individuals' borrowing constraints by the planner may lead to unlimited debt accumulation, resulting in a dynamic path featuring no steady state.

Why we need a golden rule for peer review

Abstract: The recent Editorial Board meeting for Nursing Ethics took place in September prior to the very successful 18th Nursing Ethics Conference and 3rd International Ethics in Care Conference in Leuven, Belgium. A regular item on the Agenda is the manuscript review process. This item results in much discussion of a range of challenges which include recruiting suitable reviewers, enabling timely review, facilitating reviews that are both of high quality and ethical, and safeguarding against academic misconduct. As authors and reviewers – and one of us (A.G.T.) as an Associate Editor of this journal – we were eager to consider which ethical lens would best illuminate these challenges. We agreed on what is known as ‘the Golden Rule’ – ‘treat others as we wish others to treat us’ – which has persisted in almost all religious and ethical traditions. Holding to this rule means that all of our decisions, actions and failures to act have consequences. The Golden Rule has also been described as an action guide in the scientific review process and can throw light on each of the challenges referred to above. First, regarding the challenge of recruiting suitable reviewers, it is not uncommon for an Editor to approach more than six reviewers before the necessary two agree. We propose that the Golden Rule underpins the argument that we all have an obligation to be a reviewer. Being a reviewer is both an obligation and an honour. Having difficulty finding reviewers may impact negatively on an Editor as it indicates a ‘negative signal’ that the paper is not worth publishing. We all hope that our precious research paper will be willingly reviewed and a good editor will not be swayed by refusals. In the spirit of reciprocity and academic citizenship, we need to be willing to undertake a review, when asked, for someone else. If you must decline an invitation to review, it is much appreciated if you recommend a suitable replacement reviewer. By ‘suitable’ we mean someone who has the expertise and experience to undertake a competent review. This competence relates primarily to the topic area and methodology, but it may also be helpful to have at least one reviewer from the same geographical area to better understand the research context. Editors of Nursing Ethics are committed to developing newer reviewers and regularly pair new with more experienced reviewers. Some publishers offer training courses for new reviewers and these are very helpful. The second challenge relates to enabling timely review. The Golden Rule can be reflected in reviewers’ commitment to review a manuscript; however, we recommend that you commit only if you know you can deliver by the deadline. Again, we argue that this involves being fair to authors and treating others as we wish others to treat us. Therefore, it is essential that a reviewer delivers on the promise and sticks to the deadline. It is suggested that a review should take no more than 3 h and is completed in less than 3–4 weeks – ideally in 14 days. Otherwise, we risk disappointing authors who may, in turn, feel disinclined to agree to

Golden-Rule Level of the Employment

Abstract: The competitive economy, over a long time scale, would produce a large number of general equilibria, each of which can be regarded as a possible microstate of this economy. Then by the principle of maximum entropy, we can obtain the most probable macrostate which in the case of perfect competition involving a single industry will lead to a Solow-type aggregate production function. By this aggregate production function, one can make clear how labors match firms on the balanced growth path. Here, we prove that when the capital stock of a society arrives at the golden-rule level on the balanced growth path, the social employment will reach the best level at which every firm on average employs an optimal amount of workers.

Golden Rule of Morphology and Variants of Word forms

Abstract: Abstract In many languages, some words can be written in several ways. We call them variants. Values of all their morphological categories are identical, which leads to an identical morphological tag. Together with the identical lemma, we have two or more wordforms with the same morphological description. This ambiguity may cause problems in various NLP applications. There are two types of variants – those affecting the whole paradigm (global variants) and those affecting only wordforms sharing some combinations of morphological values (inflectional variants). In the paper, we propose means how to tag all wordforms, including their variants, unambiguously. We call this requirement “Golden rule of morphology”. The paper deals mainly with Czech, but the ideas can be applied to other languages as well.

The Golden Rule and its Consequences: A Practical and Effective Solution for World Peace

Abstract: Peace is something desirable and requested by all nations in the world. What makes it necessary to address this issue is the critical, undesirable state of the current world that, despite statements by international organizations with the theme of peace, reveals growing conflict and war and irreversible damages caused by them. This article seeks to provide a practical and effective solution for achieving peace in the global community. To this end, it introduces the golden rule (treating others as you wish others to treat you) as a rule common to all nations. This rule which has a special place in moral philosophy and has been the common denominator of all religions and schools of thought from ancient times until the present provides peace throughout the world through its mechanism. With the use of analytical methods, this study examines and explains it. The results show that the most effective and powerful way to achieve world peace is the adherence to the golden rule.

‘Love of Wealth’ and Economic Growth

Abstract: In a Ramsey–Cass–Koopmans growth framework it is shown that for an optimum a benevolent social planner cannot have an excessive “love of wealth”. With a “right” “love of wealth” an optimum exists and implies higher long-run per-capita capital, income, and consumption relative to the standard model. This has important implications for comparative development trajectories. The optimum implies dynamic efficiency with the possibility of getting arbitrarily close to the golden rule where long-run per-capita consumption is maximal. It is shown that the optimal path attains its steady state more slowly. Thus, the beneficial effects of love of wealth materialize later than in the standard model. Furthermore, the economy can be decentralized as a competitive private ownership economy. One can then identify “love of wealth” with the “spirit of capitalism.” The paper thus implies that one needs a “right” level of the “spirit of capitalism” to realize any beneficial effects for the long run.

A Note on Optimal Income Redistribution in a Creative Region

Abstract: We study optimal income redistribution in a region that is creative in the sense of Richard Florida and thereby extend aspects of the recent analysis in Batabyal and Beladi (2017). Using the terminology of these researchers, members of the creative class are either artists or engineers. This bipartite grouping stems from the manner in which creative capital is acquired by the artists and the engineers. Specifically, we show that when the savings rates of the artists and the engineers comprising the creative class satisfy a particular inequality, it is possible for a regional authority (RA) to uniquely redistribute income between these two groups in a way that achieves the so called "golden rule" stock of physical capital.

Advantages of following a golden rule in a monetary union

Abstract: The European sovereign debt crisis has revived the debate about appropriate fiscal rules in the European Economic and Monetary Union. Whereas the Stability and Growth Pact and the Fiscal Compact make no distinction between public consumption and investment expenditure, the aim of the current paper is to analyze the implications of the adoption of the Golden rule in a monetary union, distinguishing between the two types of public expenditure. With the help of a macroeconomic model, we show that introducing a Golden rule and smoothing public investment expenditure would be welfare-improving, and mostly for countries where taxation rates and the productivity of public investment are highest, and for the most closed countries. It would also be the most beneficial for countries where the monetary transmission parameter, the propensity to consume, and the price elasticity of supply are weakest, whereas supply-side distortions are the strongest.

Three small essays on public investment: economic rationales, the EU fiscal framework and some statistical comparisons

Abstract: Governments undertake public investments for a number of reasons. First, spending on public investment is a means to foster economic growth, in the short run by increasing aggregate demand and in the long run by (potentially) increasing growth potential. Second, public investments can be justified by the presence of market failures. And finally, they can be undertaken due to fairness objectives. Given the growth-enhancing impact of public investment expenditure, the EU has taken several initiatives to increase the low and, during the crisis, falling level of public investment in the EU. Most prominently, an investment clause was introduced into the Stability and Growth Pact (SGP), and the Investment Plan for Europe was launched. This can be considered an (albeit imperfect) substitute for the “golden rule” advocated by its proponents since the launch of the SGP. The ratio of government investment in Austria, at about 3% of GDP, is relatively far above that of Germany (around 2% of GDP), and has recently surpassed the euro area average. However, these figures are somewhat distorted by different sector classifications in the areas of transport, hospitals and municipal services.

Public Investment and Golden Rule of Public Finance in an Overlapping Generations Model

Abstract: This paper develops an overlapping generations model with debt-financed public investment. The model assumes that the government is subject to the golden rule of public finance and that households are Yaari-Blanchard type. It is shown that the growth-maximizing and utility-maximizing tax rates do not satisfy the Barro tax rule, which is equal to the output elasticity of public capital. Furthermore, we show that both tax rates positively depend on longevity, with an aging population increasing debt per GDP. This result captures a tendency of increasing debt per GDP under population aging in the real world.

Discounting and welfare evaluation of policies

Abstract: We start with the premise that if policy discounting is to have any welfare relevance, one has to accept it being a derivative of a social welfare function (SWF). We show that if that derivative is to have a net present value (NPV) form, then the baseline allocation must be stationary. In addition, we show that at a stationary baseline in an overlapping generations growth economy, the intergenerationally fair discount rate equals the growth rate of per-capita consumption, which is, roughly, 2% for the United States. This differs from the interest rate, even in the golden rule equilibrium, unless population growth is null. The last result is based on the main theorem in Mertens and Rubinchik (2012) and is demonstrated for a policy space that might naturally arise in applications.

Do Unto Others in War? The Golden Rule in Law of Armed Conflict Training

Abstract: Law of armed conflict (LOAC) training employs different rationales to motivate soldiers and to induce their compliance with LOAC rules. Of these, none is as controversial, or as potentially contradictory, as the Golden Rule. This paper analyzes the role of the Golden Rule in historical and contemporary LOAC training material including manuals, pamphlets, circulars, and films. Research findings suggest that the Golden Rule became an increasingly popular training message after Vietnam War violations became public knowledge and that it remains an essential part of military training and doctrine. Furthermore, the Golden Rule is conceptually dynamic, having both positive and negative formulations. Since this paper is the first systematic examination of the Golden Rule in LOAC training material, the author hopes that it provides a foundation for further discussion.

Innovation, Inequality, and a Golden Rule for Growth in an Economy with R&D

Abstract: The analysis links RD the capital intensity exceeds the ratio of capital to workers (in efficiency units) that is consistent with a maximum long-run per capita consumption. CO2 emission levels could be reduced in an efficient manner on the basis of a broad approach that emphasizes Schumpeterian dynamics: Taxing emissions and giving subsidies for innovations could be useful elements of innovation-enhancing policy. Promoting green innovations—including the sustainability design of products—renewable energy, and realizing adequate genuine savings could be key policy elements for a consistent strategy to achieve sustainable growth. Moreover, green ratings for companies listed on the stock market could be crucial options for combining sustained growth, modernization, and innovation. Part of the analysis is based on the EIIW-vita global sustainability indicator.

Macroeconomic and Welfare Effects of Parametric Pension Reform in Iran

Abstract: The aim of this paper is to analyze the macroeconomic effects of parametric reforms. An adjusted Auerbach-Kotlikoff model is used to study the effects of decreasing replacement and contribution rates of the pension system. The first part concentrates on the macroeconomic effect of reforms. Our results indicate that reducing the replacement and contribution rates increase the capital stock and decrease the interest rates so the economy moves closer towards the golden rule. Under these parametric reforms, there is a long-run increase in capital stock, wages, labor supply, consumption and income of the future generations. We then measure the welfare effects of different generations and finally show how to use a Lump-Sum Redistribution Authority to calculate an aggregate efficiency measure of policy reforms. Our findings suggest an aggregate efficiency gain of 32.14 % (for replacement rate) and 4.04 % (for contribution rate) compared to the initial equilibrium.

Welfare, Population Growth and Dynamic Inefficiency in an OLG Framework

Abstract: In a two-period OLG framework, there is only one rate of population growth at which the competitive equilbrium outcome Is also the golden rule outcome. I show that this is the welfare minimizing outcome for agents. Moreover, I show that as population growth increases beyond the welfare minimizing level, agents are better off even as the economy becomes more dynamically inefficient.

Golden Versus Platinum Rules [Ethically Speaking]

Abstract: Examines the differences between the Golden Rule and the Platinum Rule. Addresses how this effects personal relationships. In short, the Golden Rule is: Treat others as you want to be treated; and the Platinum Rule is: Treat others as they want to be treated. Explores the concept of empathy and its significance when applying these rules.

A Note on Optimal Income Redistribution in a Creative Region

Abstract: We study optimal income redistribution in a region that is creative in the sense of Richard Florida and thereby extend aspects of the recent analysis in Batabyal and Beladi (2017). Using the terminology of these researchers, members of the creative class are either artists or engineers. This bipartite grouping stems from the manner in which creative capital is acquired by the artists and the engineers. Specifically, we show that when the savings rates of the artists and the engineers comprising the creative class satisfy a particular inequality, it is possible for a regional authority (RA) to uniquely redistribute income between these two groups in a way that achieves the so called “golden rule” stock of physical capital.

Is rentier capitalism that bad? Rent, efficiency and inequality dynamics

Abstract: The current economic context shows a tendency to inequality and rather weak growth Rent-seeking behavior is often blamed for that The purpose of this paper is to analyze the consequences, on the accumulation trajectory, of the existence of a rent levied by the rich on the poor The model is inspired by the articles Stiglitz 1969, Schilcht 1975 and Bourguignon 1981 In particular, convex saving is used We seek to see to what extent the introduction of a rent may call into question the Pareto-superiority of inequality proved by Bourguignon 1981 or alter the risk of decline highlighted in Mabrouk 2016 Within the limits of the assumptions of the model and of the numerical simulations carried out, we arrive at interesting and rather unexpected observations Namely, a moderate rent levied by the rich on the poor may not only allow a Pareto-improvement of the economy and prevent the risk of decline, but also, it may unlock the economy from under-accumulation trap even if initial capital endowment is insufficient The disadvantages of such a rent for the poor are felt only if the economy approaches or exceeds the golden rule where the net marginal productivity of capital is zero

“The Golden Rule”: A Portable Escape Room designed to promote empathy and playfulness in challenging social contexts

Abstract: The development of a Portable Escape Room (PER) board game aims to promote empathy as one of the key skills that, for a society in constant change, is necessary to face and solve complex social challenges. The development of a PER is a way of addressing the need for both innovative and accessible tools that can be used in different sectors of the economy. The PER not only encourages creative collaboration, but it also introduces the possibility of playfulness as a bridge for learning and problem-­‐solving in a variety of scenarios. The product itself encompasses an excellent example of a Creative Problem Solving process, and it raises awareness of the importance of embracing creativity as one of the 21st century’s most valuable skills. Keywords: Empathy, Social Change, Playfulness, Creativity, Collaboration, Board Games ___________________________________ Your Signature ___________________________________ Date