Faut-il brûler les règles budgétaires ? Leçons de l’expérience américaine (1988-2017)

Etienne Farvaque, Marcelin Joanis and Nicolas Ooghe

Revue française d'économie, 2021, vol. XXXVI, issue 3, 103-154

Abstract: The study of fiscal rules in force in the American states, most of them for a very long time, allows us to judge whether their effect is pro- or counter-cyclical in front of a shock. We analyze the fiscal adjustments implemented, not only by studying changes in spending and taxes, but also by considering the variations in public employment. We use a more detailed classification of fiscal rules than is commonly used in the literature and also incorporate rainy day funds, which provide a smoothing instrument, for those states that have them. We show that, for American states in an annual budget cycle, budget rules are not neutral: the number of budget rules in the implementation phase of the budget has a limiting function on the budget, especially if they are constitutional in nature. It is these rules that force governors to engineer adjustments, with an amplified effect depending on the strength of the unanticipated shock (thus generating procyclical behavior).

Date: 2021
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Working Paper: Faut-il brûler les règles budgétaires ? Leçons de l’expérience américaine (1988-2017) (2022)
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