Fiscal stabilisation rule

Hovick Shahnazarian

MPRA Paper from University Library of Munich, Germany

Abstract: This paper decomposes the fiscal balance into a cyclical and a structural component using an optimal fiscal stabilisation rule derived from a loss function where the government is assumed to keep structural balance close to the targeted surplus for fiscal balance while at the same time stabilising the GDP- and the inflation gap. A first-order Taylor expansion of fiscal balance is then used to further disaggregate the different components of fiscal balance. These practical policy rules can be used to calculate the magnitude of automatic stabilisers and the appropriate discretionary fiscal policies conditional on the state of the economy.

Keywords: Stabilisation policy; fiscal stabilisation rules; Automatic stabilisers; Discretionary fiscal policy (search for similar items in EconPapers)
JEL-codes: E61 E62 H20 H50 H60 (search for similar items in EconPapers)
Date: 2022-10-18
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https://mpra.ub.uni-muenchen.de/115061/1/MPRA_paper_115061.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/115074/1/MPRA_paper_115074.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/115209/1/MPRA_paper_115074.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/115209/8/MPRA_paper_115209.pdf revised version (application/pdf)

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