Fiscal Rules and Discretion in a World Economy / Marina Halac, Pierre Yared.

Format:

Book

Author/Creator:

Halac, Marina.

Contributor:

National Bureau of Economic Research.

Yared, Pierre.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21492.

NBER working paper series no. w21492

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

Governments are present-biased toward spending. Fiscal rules are deficit limits that trade off commitment to not overspend and flexibility to react to shocks. We compare coordinated rules - chosen jointly by a group of countries - to uncoordinated rules. If governments' present bias is small, coordinated rules are tighter than uncoordinated rules: individual countries do not internalize the redistributive effect of interest rates. However, if the bias is large, coordinated rules are slacker: countries do not internalize the disciplining effect of interest rates. Surplus limits enhance welfare, and increased savings by some countries or outside economies can hurt the rest.

Notes:

Print version record

August 2015.