Fiscal Discipline and Rules for Controlling the Deficit: Some Unpleasant Keynesian Arithmetic

Neil Bruce and Douglas Purvis

Working Papers from Queen's University, Department of Economics

Abstract: In this paper we argue that rules are desirable in the conduct of fiscal policy. Since the market does not constrain federal borrowing, policy-imposed constraints are necessary to maintain fiscal prudence. A simple rule such as the annually balanced budget is sufficient for fiscal prudence but is extremely pro-cyclical. We explore the problem of specifying a rule which maintains fiscal prudence and permits counter-cyclical policy.

Date: 1983

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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:536

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