Simple, Implementable Fiscal Policy Rules / Michael Kumhof, Douglas Laxton.

Format:

Book

Government document

Author/Creator:

Kumhof, Michael.

Contributor:

Laxton, Douglas.

International Monetary Fund.

Series:

IMF Working Papers; Working Paper ; No. 2009/076

IMF Working Papers

Language:

English

Subjects (All):

Fiscal policy.

Economic policy.

Physical Description:

1 online resource (43 p.)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2009.

Language Note:

English

Summary:

This paper analyzes the scope for systematic rules-based fiscal activism in open economies. Relative to a balanced budget rule, automatic stabilizers significantly improve welfare. But they minimize fiscal instrument volatility rather than business cycle volatility. A more aggressively countercyclical tax revenue gap rule increases welfare gains by around 50 percent, with only modest increases in fiscal instrument volatility. For raw materials revenue gaps the government should let automatic stabilizers work. The best fiscal instruments are targeted transfers, consumption taxes and labor taxes, or, if it enters private utility, government spending. The welfare gains are significantly lower for more open economies.

Contents:

Contents; I. Introduction; II. Literature Survey; III. The Model; A. Households; 1. Infinitely Lived Households; 2. Liquidity Constrained Households; B. Manufacturing; C. Copper Production; D. Distribution; E. Government; 1. Monetary Policy; 2. Fiscal Policy; F. Fiscal Policy Rules; 1. Chile's Structural Surplus Rule; 2. A Tax Revenue Gap Targeting Rule; 3. A Tax Revenue Gap Instrument Rule; G. Shocks; H. Equilibrium and Balance of Payments; I. Computation of Welfare; IV. Calibration; A. Steady State; B. Policy Rules, Adjustment Costs and Shocks; Tables; 1. Key Moments of the Data; V. Results

A. Monetary RulesB. Impulse Responses; C. Welfare; D. Fiscal Instrument Volatility; E. Welfare - Fiscal Instrument Volatility Efficiency Frontiers; F. Macroeconomic Volatility; G. Other Real Activity Gaps?; H. Openness; I. Alternative Fiscal Instruments; VI. Conclusion; Figures; 1. IRF for Technology Shock; 2. IRF for Investment Shock; 3. IRF for Copper Demand Shock; 4. Welfare for Tax Revenue Gap Rule; 5. Fiscal Instrument Volatility for Tax Revenue Gap Rule; 6. Efficiency Frontiers; 7. Macroeconomic Volatility for Tax Revenue Gap Rule; 8. Openness; 9. Welfare and Fiscal Instruments

10. Fiscal Volatility for Different Fiscal InstrumentsAppendices; 1. Optimality Conditions of the Model; 2. Welfare Computations; References

Notes:

Description based upon print version of record.

Includes bibliographical references.

Description based on print version record.

ISBN:

9786612842979

9781462359813

1462359817

9781452784380

1452784388

9781451872231

1451872232

9781282842977

1282842978

OCLC:

608248529