Fiscal Rules and Discretion in a World Economy

Marina Halac and Pierre Yared

No 21492, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: D02 D82 E6 H1 P16 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-ger and nep-mac
Note: EFG POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Marina Halac & Pierre Yared, 2018. "Fiscal Rules and Discretion in a World Economy," American Economic Review, vol 108(8), pages 2305-2334.

Downloads: (external link)
http://www.nber.org/papers/w21492.pdf (application/pdf)

Related works:
Journal Article: Fiscal Rules and Discretion in a World Economy (2018)
Working Paper: Fiscal Rules and Discretion in a World Economy (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:21492

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w21492

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().