Restraining Yourself: Fiscal Rules and Stabilization

Tamim Bayoumi and Barry Eichengreen

No 1029, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: State budgets in the United States played a significant macroeconomic role in the 1970s and 1980s, and the level of cyclical responsiveness was affected by the severity of statutory and constitutional fiscal restraints. Moving from no fiscal restraints to the most stringent restraints lowered the fiscal offset to income fluctuations by around 40%. Simulations indicate that a reduction in aggregate fiscal stabilizers of this size could lead to a significant increase in the variance of aggregate output.

Keywords: Fiscal Restraints; Fiscal Stabilization (search for similar items in EconPapers)
JEL-codes: E62 H61 H74 (search for similar items in EconPapers)
Date: 1994-09
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Citations: View citations in EconPapers (11)

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Working Paper: Restraining Yourself: Fiscal Rules and Stabilization (1994)
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