Does it Cost to be Virtuous? The Macroeconomic Effects of Fiscal Constraints

Fabio Canova () and Evi Paraskevi Pappa ()

No 11065, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study whether and how fiscal restrictions alter the business cycle features of macrovariables for a sample of 48 US states. We also examine the "typical" transmission properties of fiscal disturbances and the implied fiscal rules of states with different fiscal restrictions. Fiscal constraints are characterized with a number of indicators. There are similarities in second moments of macrovariables and in the transmission properties of fiscal shocks across states with different fiscal constraints. The cyclical response of expenditure differs in size and sometimes in sign, but heterogeneity within groups makes point estimates statistically insignificant. Creative budget accounting is responsible for the pattern. Implications for the design of fiscal rules and the reform of the Stability and Growth Pact are discussed.

JEL-codes: E3 E5 H7 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pbe
Date: 2005-01
Note: EFG PE
View list of references View citations in EconPapers

Published relationship to a non-chapter. This should not happen. Please contact NBER.

Downloads: (external link)
http://www.nber.org/papers/w11065.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Chapter: Does it Cost to be Virtuous? The Macroeconomic Effects of Fiscal Constraints (2006)
Working Paper: Does it Cost to be Virtuous? The Macroeconomic Effect of Fiscal Constraints (2004)
Working Paper: Does it Cost to be Virtuous? The Macroeconomic Effects of Fiscal Constraints (2004)
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: http://EconPapers.repec.org/RePEc:nbr:nberwo:11065

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w11065
The price is Paper copy available by mail.

Access Statistics for this paper

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