The elusive costs and the immaterial gains of fiscal constraints

Fabio Canova and Evi Pappa

No 295, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: We study whether fiscal restrictions affect volatilities and correlations of macrovariables and the probability of excessive debt for a sample of 48 US states. Fiscal constraints are characterized with a number of indicators and volatility and correlations are computed in several ways. The second moments of macroeconomic variables in states with different fiscal constraints are economically and statistically similar. Excessive debt and the mechanism linking budget deficit and excessive debts are independent of whether tight or loose fiscal constraints are in place. Creative budget accounting may account for the results.

Date: 2005
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Related works:
Journal Article: The elusive costs and the immaterial gains of fiscal constraints (2006)
Working Paper: The Elusive Costs and the Immaterial Gains of Fiscal Constraints (2005)
Working Paper: The elusive costs and the immaterial gains of fiscal contraints (2005)
Working Paper: The elusive costs and the immaterial gains of fiscal constraints (2004)
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