Designing fiscal rules for commodity exporters

Carlos García, Jorge Restrepo () and Evan Tanner ()
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Jorge Restrepo: Banco Central de Chile, http://www.bcentral.cl

ILADES-UAH Working Papers from Universidad Alberto Hurtado/School of Economics and Business

Abstract: We compare welfare levels under two alternative fiscal rules: a procyclical balanced budget policy and an acyclical structural surplus (government accumulates assets). We use a dynamic, stochastic, general equilibrium model. The acylical rule benefits households that do not enjoy access to capital markets. It provides a financial cushion that they themselves cannot provide, while also boosting their mean consumption. By contrast, households that enjoy full access to capital markets suffer under this rule. Effectively, the government usurps their previous role in smoothing consumption and accumulating assets. However, a policy in between these extremes may be preferred by all.

Keywords: welfare; small open economy; fiscal rules; rule of thumb consumers; government spending. (search for similar items in EconPapers)
JEL-codes: E32 E61 E62 E63 F41 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2007-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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