Identifying endogenous fiscal policy rules for macroeconomic models

Javier Pérez and Paul Hiebert ()
Additional contact information
Paul Hiebert: European Central Bank

No E2002/06, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: In this paper, we present a model-based method for identifying fiscal closure rules in stochastic macroeconomic models. The methodology is based on the stability analysis of the model at hand, with an endogenous derivation of a reaction on the part of the fiscal authority to state variables in the model. The rule achieves the dual aim of imposing solvency on the fiscal sector and generating a state-contingent dynamic adjustment in a framework consistent with the properties of the model. Up to now, fiscal rules in leading large-scale macroeconomic forecasting models have been imposed exogenously, and in this sense are not necessarily compatible with the formulation of other sectors of these models. An example of the derivation procedure, including some illustrative results, is provided using a small calibrated macro model.

Keywords: Macroeconomic models; Closure rules; Fiscal policy; Stability analysis (search for similar items in EconPapers)
JEL-codes: C5 C62 E6 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2002-07
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Identifying endogenous fiscal policy rules for macroeconomic models (2004)
Working Paper: Identifying endogenous fiscal policy rules for macroeconomic models (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:cea:doctra:e2002_06

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