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.

Golden Rule on “Golden Rule”

Abstract: The Chief Executive Officer of the company that brought the original Golden Rule lawsuit explains why the lawsuit was brought how it was settled, and what he now, 3 years after the settlement, thinks of it.

Golden Rule of Forecasting Rearticulated: Forecast Unto Others as You Would Have Them Forecast Unto You

Abstract: The Golden Rule of Forecasting is a general rule that applies to all forecasting problems. The Rule was developed using logic and was tested against evidence from previously published comparison studies. The evidence suggests that a single violation of the Golden Rule is likely to increase forecast error by 44 percent. Some commentators argue that the Rule is not generally applicable, but do not challenge the logic or evidence provided. While further research might provide useful findings, available evidence justifies adopting the Rule now. People with no prior training in forecasting can obtain the substantial benefits of following the Golden Rule by using the Checklist to identify biased and unscientific forecasts at little cost.

The Golden Rule of Public Finance: A Panacea?

Abstract: This paper shows that adopting a golden rule does not guarantee that public investment will improve economic outcomes. Our results suggest that only when the rate of return on public capital is greater than the cost of public borrowing, expanding public investment is bene…cial. Otherwise, both macroeconomic stability and debt sustainability are compromised. As such, we argue that policy-makers should prioritise the productivity of public investment rather than its level.

No Silver Bullets in Investing (Just Old Snake Oilin New Bottles)

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.

The Political Economy of Public Investment

Abstract: The political distortions in public investment projects are investigated within the context of a bipartisan political economy framework. The role of scrapping and modifying projects of previous governments receives special attention. The party in government has an incentive to overspend on large ideological public investment projects in order to bind the hands of its successor. This leads to a bias for excessive debt, especially if the probability of being removed from office is large. These political distortions have implications for the appropriate format of a fiscal rule. A deficit rule, like the Stability and Growth Pact, mitigates the overspending bias in ideological investment projects and improves social welfare. The optimal second-best restriction on public debt exceeds the level of public debt that would prevail under the socially optimal outcome. Social welfare may be boosted even more by appropriate investment restrictions: with a restriction on (future) investment in ideological projects, the current government perceives a large benefit of a debt reduction. However, debt and investment restrictions are not needed if investment projects only have a financial return.