EconPapers    
Economics at your fingertips  
 

Fiscal Rules in a Monetary Economy: Implications for Growth and Welfare

Tetsuo Ono ()

No 18-27, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study considers two fiscal rules, a debt rule that controls the debt-to- GDP ratio, and an expenditure rule that controls the expenditure-to-GDP ratio, in a monetary growth model with financial intermediation. Tightening fiscal rules promotes economic growth and thus benefits future generations. However, there could be two equilibria of the nominal interest rates, and the welfare effects of the rules on the current generation are different between the two equilibria. In particular, the effects of a decreased debt-to-GDP ratio depend on its initial ratio; a low (high) ratio country has an incentive (no incentive) to reduce the ratio further from the viewpoint of the current generation's welfare. This result offers a reason for difficulties with fiscal reform in countries with already high debt-to-GDP ratios.

Keywords: Fiscal Rule; Government Debt; Economic Growth (search for similar items in EconPapers)
JEL-codes: E62 E63 H63 O42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-mac
Date: 2018-08
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www2.econ.osaka-u.ac.jp/library/global/dp/1827.pdf (application/pdf)

Related works:
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:osk:wpaper:1827

Access Statistics for this paper

More papers in Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Atsuko SUZUKI ().

 
Page updated 2019-04-04
Handle: RePEc:osk:wpaper:1827