Public-Debt/Output Guidelines: the Case of Israel

Zvi Hercowitz () and Michel Strawczynski

No 2000.03, Bank of Israel Working Papers from Bank of Israel

Abstract: This paper analyzes the implications of adding to a tax-smoothing framework the cost of deviating upwards from a public-debt/output guideline. The implications for the dynamic paths of the tax rate, the debt/output ratio and the government spending/output ratio are derived. A simulation of the model with Israeli data suggests that Israeli fiscal behavior is consistent with the (implicit) existence of such a guideline. Some international perspective, with countries having explicit guidelines in the context of the Maastricht Treaty, is also presented.

Pages: 28 pages
Date: 2000-05
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https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2000.03.pdf First version, 2000 (application/pdf)

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