Golden Rule (fiscal policy)

About: Golden Rule (fiscal policy) is a research topic. Over the lifetime, 661 publications have been published within this topic receiving 9789 citations.

Implementing the Golden Rule for Public Investment in Europe: Safeguarding Public Investment and Supporting the Recovery

Abstract: Most parts of the Euro area have seen seven years of deep economic crisis. The strategy of tightening the fiscal constraints of the SGP has driven many member states into austerity. In contrast, the golden rule of public investment proposed in this study would be one important element of the necessary institutional reform. The rule is widely accepted in traditional public finance and would allow financing net public investment by government deficits thus promoting intergenerational fairness as well as economic growth. A pragmatic version focusing on net public investment as defined in the national accounts minus military expenditures plus investment grants for the private sector could quickly be implemented. Net public investment should be deducted from the relevant deficit measures of the Stability and Growth Pact and the fiscal compact. Over time it could be technically and statistically refined and potentially include other – more intangible – types of investment like education expenditures. As political implementation would probably take some time, the golden rule would have to be complemented by expansionary fiscal policy to provide the urgently needed boost to the European economy in the short term. This could be done by a short term European Investment Programme similar to the 2008 European Economic Recovery Programme during the Great Recession. Such a programme could also allow for investment needs beyond the narrow national accounts definition to contribute to public investment in a broader sense, e.g. for expenditure related to the currently neglected Europe 2020 goals such as social inclusion.

Welfare implications of national debt in a OLG model with endogenous fertility

Abstract: In the present work we show that, when one allows for endogenous fertility in Diamond's (1965) OLG model, public debt plays still a clear-cut role on dynamic inefficiency (DI): for correcting DI, national debt must be increased. DI is more likely to occur when the economy capital income share and the preference for children are sufficiently low and the degree of patience is sufficiently high. However, differently from Diamond's case, DI turns out to be a necessary but not a succient condition for welfare improvements to obtain via debt increases, since, in presence of endogenous fertility, the optimal level of debt is typically lower than the one associated to the traditional Golden Rule. Hence, not taking fertility choices into account would lead policymakers to overshoot the target, i.e. to issue too high a level of national debt. Finally, a sensitivity analysis shows that the optimal level of debt is higher the lower the capital share, the higher individuals' degree of patience, the bigger the child rearing cost and the lower the preference for children. On policy grounds we argue that for debt tightening policies to be optimal in the long run, it is necessary that the cost of rearing children does not increase (or, if anything, reduces).

The Golden Rule and Business Ethics: An Examination

Abstract: The phenomenon of globalization of markets has been accompanied by calls for a globalization of ethical norms. One principle often referred to in such calls is the so-called Golden Rule. The rule, often stated as “Do unto others as you would have others do unto you,” has long been used and referenced in the business literature. But those who use it often do so without full realization of the rule itself and what it stands for. This paper examines the history, meaning, and problems of the rule and attempts to show, through a case analysis, how these problems surface when using the rule in a business context. In so doing it attempts to clarify exactly what the rule means and how it can fit into a universal code of morality.