Topic
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.
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01 Jan 2007
TL;DR: In the last decade, many OECD countries have experienced with budgetary rules in order to help restore or safeguard fiscal sustainability as mentioned in this paper, including the USA with the 1985 Balanced Budget and Emergency Deficit Control Act (Gramm- Rudman Act) which was relaxed and renamed in 1990 Budget Enforcement Act (BEA) introducing caps on discretionary spending.
Abstract: In the last decade, many OECD countries have experienced with budgetary rules in order to help restore or safeguard fiscal sustainability. The most prominent examples are the USA with the 1985 Balanced Budget and Emergency Deficit Control Act (Gramm- Rudman Act) which was relaxed and renamed in the 1990 Budget Enforcement Act (BEA) introducing caps on discretionary spending. The caps could be exceeded in the event of “emergencies”. In the end most of its provisions elapsed in September 2002, without being extended or replaced.4 In the United Kingdom, two fiscal rules were set out in 1997: the so-called “golden rule”, which states that over the cycle current outlays, including the consumption of fixed capital should not be financed by borrowing; and a debt rule, or “sustainability investment rule”, stipulating that over the cycle the ratio of net debt to GDP should not exceed a prudent level, defined for the time being as 40 per cent. Several other OECD countries have adopted new rules since the 1990s (e.g. New Zealand and Switzerland with its debt brake — “Schuldenbremse”)
1 citations
TL;DR: 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 as mentioned in this paper, and this is the welfare minimizing outcome for agents.
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.
1 citations
Journal Article•
TL;DR: In this article, the authors provide empirical evidence of the heterogeneous borrowing behaviors of French regions, despite a common accountability constraint that forces them to balance their budget and to borrow only to finance investment expenditure (golden rule).
Abstract: This paper provides empirical evidence of the heterogeneous borrowing behaviours of French regions, despite a common accountability constraint that forces them to balance their budget and to borrow only to finance investment expenditure (golden rule). To this end, we conduct a quantile regression analysis. The heterogeneity is very pronounced when the regions face a negative shock on debt, for instance a tightening of financial conditions. Our findings may be due to the fact that the Golden rule can be thought of as a “soft” rule if some local administrations believe that a financial rescue from the central government is automatic. Hence, in the French case the bailing-out hypothesis cannot be rejected.
Classification JEL: H74, E62, K34, R5
1 citations