Advanced Search
MyIDEAS: Login to save this paper or follow this series

Fiscal Policy Rules for Stabilisation and Growth: A Simulation Analysis of Deficit and Expenditure Targets in a Monetary Union

Contents:

Author Info

  • Tilman Brück
  • Rudolf Zwiener

Abstract

We analyse the effectiveness of fiscal policy rules for business cycle stabilisation in a monetary union using a quarterly macro-econometric model of Germany. The simulations compare a deficit target and an expenditure target under a range of supply, demand and fiscal shocks. Their effects are evaluated by their impact on prices and output. The analysis demonstrates that in general the deficit target of the stability pact leads to less stabilisation than an expenditure target. The results suggest that the deficit rule of the stability pact should be replaced with an expenditure rule augmented by medium-term debt targets.

Download Info

If 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.
File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.41892.de/dp427.pdf
Download Restriction: no

Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 427.

as in new window
Length: 23 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp427

Contact details of provider:
Postal: Mohrenstraße 58, D-10117 Berlin
Phone: xx49-30-89789-0
Fax: xx49-30-89789-200
Email:
Web page: http://www.diw.de/en
More information through EDIRC

Related research

Keywords: Fiscal policy; International policy coordination; Simulation;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Engwerda, Jacob C. & van Aarle, Bas & Plasmans, Joseph E. J., 2002. "Cooperative and non-cooperative fiscal stabilization policies in the EMU," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 26(3), pages 451-481, March.
  2. Marco Buti & Sylvester Eijffinger & Daniele Franco, 2003. "Revisiting the Stability and Growth Pact: grand design or internal adjustment?," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 180, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Michael J. Artis & Marco Buti, 2000. "'Close-to-Balance or in Surplus': A Policy-Maker's Guide to the Implementation of the Stability and Growth Pact," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(4), pages 563-591, November.
  4. Roel Beetsma & Xavier Debrun & Frank Klaassen, 2001. "Is Fiscal Policy Coordination in EMU Desirable?," CESifo Working Paper Series 599, CESifo Group Munich.
  5. Andrew Mountford & Harald Uhlig, 2009. "What are the effects of fiscal policy shocks?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 24(6), pages 960-992.
  6. Anne Brunila & Marco Buti & Jan In 'T Veld, 2003. "Fiscal Policy in Europe: How Effective Are Automatic Stabilisers?," Empirica, Springer, Springer, vol. 30(1), pages 1-24, March.
  7. Tilman Brück & Andreas Stephan, 2005. "Do Eurozone Countries Cheat with Their Budget Deficit Forecasts?," Discussion Papers of DIW Berlin 508, DIW Berlin, German Institute for Economic Research.
  8. Belke, Ansgar, 2002. "Towards a Balanced Policy Mix under EMU: Co-ordination of Macroeconomic Policies and ‘Economic Government’?," Journal of Economic Integration, Center for Economic Integration, Sejong University, Center for Economic Integration, Sejong University, vol. 17, pages 21-53.
  9. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer.
  10. Uhlig, H.F.H.V.S., 2002. "One Money, But Many Fiscal Policies in Europe: What are the Consequences?," Discussion Paper, Tilburg University, Center for Economic Research 2002-32, Tilburg University, Center for Economic Research.
  11. Andrew Hughes Hallett & Laura Piscitelli, 2002. "Does One Size Fit All? A currency union with asymmetric transmissions and a stability pact," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(1), pages 71-96.
  12. Alan J. Auerbach & Daniel Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," NBER Working Papers 7662, National Bureau of Economic Research, Inc.
  13. Christopher Allsopp, 2002. "The Future of Macroeconomic Policy in the European Union," Discussion Papers, Monetary Policy Committee Unit, Bank of England 07, Monetary Policy Committee Unit, Bank of England.
  14. Donatella Gatti, 2002. "Co-ordinating fiscal authorities in the euro-zone: a key role for the ECB," Oxford Economic Papers, Oxford University Press, vol. 54(1), pages 56-71, January.
  15. Tilman Brück & Andreas Cors & Klaus F. Zimmermann & Rudolf Zwiener, 2002. "Stability Criteria and Convergence: The Role of the System of National Accounts for Fiscal Policy in Europe," Discussion Papers of DIW Berlin 318, DIW Berlin, German Institute for Economic Research.
  16. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
  17. Marco Buti & Werner Roeger & Jan In't Veld, 2001. "Stabilizing Output and Inflation: Policy Conflicts and Co-operation under a Stability Pact," Journal of Common Market Studies, Wiley Blackwell, Wiley Blackwell, vol. 39(5), pages 801-828, December.
  18. Creel, Jérôme, 2002. "The European Stability Pact and Feedback Policy Effects," Journal of Economic Integration, Center for Economic Integration, Sejong University, Center for Economic Integration, Sejong University, vol. 17, pages 570-595.
  19. Dixit, Avinash & Lambertini, Luisa, 2001. "Monetary-fiscal policy interactions and commitment versus discretion in a monetary union," European Economic Review, Elsevier, Elsevier, vol. 45(4-6), pages 977-987, May.
  20. Heijdra, Ben J. & Meijdam, Lex, 2002. "Public investment and intergenerational distribution," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 26(5), pages 707-735, May.
  21. Marín, José M., 2002. "Sustainability of public finances and automatic stabilisation under a rule of budgetary discipline," Working Paper Series, European Central Bank 0193, European Central Bank.
  22. Andrew Hughes Hallett & Peter Mooslechner, 1999. "Challenges for Economic Policy Coordination within European Monetary Union," Empirica, Springer, Springer, vol. 26(3), pages 169-170, September.
  23. Gottfried Haber, 2001. "Simulation Analysis of Public Debt and Fiscal Deficit in Austria – Optimal Economic Policies for the Past and the Future," Empirica, Springer, Springer, vol. 28(1), pages 69-95, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Onorante, Luca & Pedregal, Diego J. & Pérez, Javier J. & Signorini, Sara, 2010. "The usefulness of infra-annual government cash budgetary data for fiscal forecasting in the euro area," Journal of Policy Modeling, Elsevier, Elsevier, vol. 32(1), pages 98-119, January.
  2. Bonatti, Luigi & Cristini, Annalisa, 2008. "Breaking the Stability Pact: Was it predictable?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 30(5), pages 793-810.
  3. Alexander Herzog-Stein & Fabian Lindner & Rudolf Zwiener, 2013. "Is the supply side all that counts?," IMK Report, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 87e-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  4. Roberto Golinelli & Sandro Momigliano, 2006. "Real-time determinants of fiscal policies in the euro area: Fiscal rules, cyclical conditions and elections," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 609, Bank of Italy, Economic Research and International Relations Area.
  5. Kenneth Lewis & Laurence Seidman, 2006. "Overcoming the Zero Interest-Rate Bound: A Quantitative Prescription," Working Papers, University of Delaware, Department of Economics 06-14, University of Delaware, Department of Economics.
  6. Ferré, Montserrat, 2012. "The effects of uncertainty about countries’ compliance with the Stability and Growth Pact," Journal of Policy Modeling, Elsevier, Elsevier, vol. 34(5), pages 660-674.
  7. Escario, Regina & Gadea, María Dolores & Sabaté, Marcela, 2012. "Multicointegration, seigniorage and fiscal sustainability. Spain 1857–2000," Journal of Policy Modeling, Elsevier, Elsevier, vol. 34(2), pages 270-283.
  8. Menguy, Séverine, 2008. "A dynamic rule applied to the threshold imposed on the European budgetary deficits," Journal of Policy Modeling, Elsevier, Elsevier, vol. 30(6), pages 1093-1105.
  9. Ferré, Montserrat, 2008. "Fiscal policy coordination in the EMU," Journal of Policy Modeling, Elsevier, Elsevier, vol. 30(2), pages 221-235.
  10. Golinelli, Roberto & Momigliano, Sandro, 2006. "Real-time determinants of fiscal policies in the euro area," Journal of Policy Modeling, Elsevier, Elsevier, vol. 28(9), pages 943-964, December.
  11. Hauptmeier, Sebastian & Sanchez Fuentes, Jesus & Schuknecht, Ludger, 2010. "Towards expenditure rules and fiscal sanity in the euro area," Working Paper Series, European Central Bank 1266, European Central Bank.
  12. Trachanas, Emmanouil & Katrakilidis, Constantinos, 2013. "Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain," Journal of Policy Modeling, Elsevier, Elsevier, vol. 35(5), pages 730-749.
  13. Aurélien Eyquem, 2007. "Fiscal Policy in an Estimated Model of the European Monetary Union," Economics Working Paper Archive (University of Rennes 1 & University of Caen), Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS 200705, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  14. Paolo Biraschi, . "Searching for the optimal EMU fiscal rule:an ex-post analysis of the SGP reform proposals," Working Papers, Department of the Treasury, Ministry of the Economy and of Finance wp2008-7, Department of the Treasury, Ministry of the Economy and of Finance.
  15. Alexander Herzog-Stein & Fabian Lindner & Rudolf Zwiener, 2013. "Nur das Angebot zählt?," IMK Report, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute 87-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  16. Ahmad, Nazneen & Xiao, Wei, 2013. "End of double taxation: Is the policy better when announced?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 35(6), pages 928-942.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:diw:diwwpp:dp427. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek).

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.