Macroeconomic Policy: Rules versus Discretion
AbstractThe article discusses the fundamental principles of macroeconomic policy. It traces the development of macroeconomic policy ideas, and, particularly, the transition cycle from adhering to strictly defined rules to free discretion and vice versa – back to restricting the freedom of implementation of macroeconomic policy instruments. The article analyses the advantages and disadvantages of discretion as compared to the management that follows strictly defined rules. The special focus is on Bulgarian practice and tradition. The article proves that throughout history Bulgaria’s governing elite has failed to take advantage of discretionary management and it has been rather the norm for the government to abuse (deliberately or not) the right to a greater management freedom. On the contrary, when macroeconomic management has had to adhere to specific imperative restrictions, positive results have prevailed. Bulgarian practice has confirmed the theoretical statement that the losses resulting from poor discretionary national macroeconomic policy are much greater than the benefits resulting from a well-defined policy, carried out consistently. The nature of and changes in monetary policy during the 1990s and the introduction of the currency board arrangement are a telling contemporary example of this statement. The recent policies of the governing elite have been focussed on fiscal policy, bringing about continuing attempts for large-scale economic experiments, in spite of the lack of clear estimation of the possible consequences. The article’s analysis outlines some suggestions and recommendations, which are based on the adherence to clearly defined rules in fiscal policies and focuses the efforts of the state on establishing and developing adequate market institutions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Thought.
Volume (Year): (2003)
Issue (Month): 7 ()
Other versions of this item:
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vito Tanzi & Howell H. Zee, 1996.
"Fiscal Policy and Long-Run Growth,"
IMF Working Papers
96/119, International Monetary Fund.
- Frank Hahn & Robert Solow, 1997. "A Critical Essay on Modern Macroeconomic Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258154x, January.
- Leslie Lipschitz & Alex Mourmouras & Timothy D. Lane, 2002. "Capital Flows to Transition Economies: Master or Servant," IMF Working Papers 02/11, International Monetary Fund.
- G. A. Mackenzie, 1989. "Are All Summary Indicators of the Stance of Fiscal Policy Misleading?," IMF Staff Papers, Palgrave Macmillan, vol. 36(4), pages 743-770, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vassil Zahariev).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.