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Identifying endogenous fiscal policy rules for macroeconomic models Author info | Abstract | Publisher info | Download info | Related research | Statistics Javier J. Pérez () (Centro de Estudios Andaluces )
Paul Hiebert () (European Central Bank)
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registered author(s):
In this paper, we present a model-based method for identifying fiscal closure rules in stochastic macroeconomic models. The methodology is based on the stability analysis of the model at hand, with an endogenous derivation of a reaction on the part of the fiscal authority to state variables in the model. The rule achieves the dual aim of imposing solvency on the fiscal sector and generating a state-contingent dynamic adjustment in a framework consistent with the properties of the model. Up to now, fiscal rules in leading large-scale macroeconomic forecasting models have been imposed exogenously, and in this sense are not necessarily compatible with the formulation of other sectors of these models. An example of the derivation procedure, including some illustrative results, is provided using a small calibrated macro model.
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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number
E2002/06.
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Length: 22 pages
Date of creation: Jul 2002Date of revision:
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Keywords: Macroeconomic models ; Closure rules ; Fiscal policy ; Stability analysis ; Other versions of this item:
Find related papers by JEL classification: C5 - Mathematical and Quantitative Methods - - Econometric Modeling E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
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