Reglas versus Discreción en la Política Fiscal: Introducción al caso Dominicano

Rules vs Discretion in Fiscal Policy: An Introduction to the Case of the Dominican Republic

Raul Ovalle and Francisco Ramírez de León ()

MPRA Paper from University Library of Munich, Germany

Abstract: The presence of deficit bias in fiscal policy, both at global as well as domestic level, has generated a debate around the viability of the adoption of fiscal rules to reduce such bias. In absence of an evaluation of this subject for the dominican case, this paper contributes to this discussion through the analysis of the impact of the introduction of different types of fiscal rules on macroeconomic volatility relative to the discretionary case. Results suggest that rules based on public expenditure adjustment, instead of taxes, reduce volatility. In contrast, fiscal balance objectives and limits on revenues introduce more validity, as the theory predict. This suggest that there is space for the modification of the current fiscal policy framenwork to one producing less macroeconomic uncertainty, considering the credible commitment of policymakers involved in the adoption of fiscal rules.

Keywords: Fiscal rules; Fiscal bias; DSGE Modelling (search for similar items in EconPapers)
JEL-codes: E32 E37 E62 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-mac
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