Beyond 2015: Maintaining Ireland’s Public Finances on a Sustainable Path
AbstractIn this note, three mechanical fiscal rules that are designed to maintain a sustainable path for the public finances are examined. Adherence to a strict numerical target for the deficit ratio has a procyclical effect on the economy’s growth rate. Building a safety margin into deficit targets in the manner of the Stability and Growth Pact allows the public finances to have a stabilising influence on the growth cycle and ensures a lower average government debt ratio is achieved over time. A debt target rule would result in a different path for the structural primary budget balance and the debt ratio over time even when the long run targets for those variables were the same as under the Pact.
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Bibliographic InfoPaper provided by Central Bank of Ireland in its series Economic Letters with number 05/EL/11.
Date of creation: Jul 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-06 (All new papers)
- NEP-FDG-2012-10-06 (Financial Development & Growth)
- NEP-PBE-2012-10-06 (Public Economics)
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