The debt brake: business cycle and welfare consequences of Germany's new fiscal policy rule

Eric Mayer and Nikolai Stähler

No 2009,24, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: In a New Keynesian DSGE model with non-Ricardian consumers, we show that automatic stabilization according to a countercyclical spending rule following the idea of the debt brake is well suited both to steer the economy and in terms of welfare. In particular, the adjustment account set up to record public deficits and surpluses serves well to keep the level of government debt stable. However, it is essential to design its feedback to government spending correctly, where discretionary lapses should be corrected faster than lapses due to estimation errors.

Keywords: Fiscal policy; debt brake; welfare; dsge (search for similar items in EconPapers)
JEL-codes: E32 E62 G00 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/27750/1/608213276.PDF (application/pdf)

Related works:
Journal Article: The debt brake: business cycle and welfare consequences of Germany’s new fiscal policy rule (2013)
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:zbw:bubdp1:200924

Access Statistics for this paper

More papers in Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().