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

Eric Mayer and Nikolai Stähler

Empirica, 2013, vol. 40, issue 1, 39-74

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. Copyright Springer Science+Business Media, LLC. 2013

Keywords: Fiscal policy; Debt brake; Welfare; DSGE; E32; G61; E62 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10663-011-9177-0 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The debt brake: business cycle and welfare consequences of Germany's new fiscal policy rule (2009)
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:kap:empiri:v:40:y:2013:i:1:p:39-74

Ordering information: This journal article can be ordered from
http://www.springer. ... ration/journal/10663

DOI: 10.1007/s10663-011-9177-0

Access Statistics for this article

Empirica is currently edited by Fritz Breuss and Fritz Breuss

More articles in Empirica from Springer, Austrian Institute for Economic Research, Austrian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().