Alternative Specifications of Intertemporal Fiscal Policy in a Small Theoretical Model
AbstractIn this working papers, we use a simple neoclassical growth model to illustrate how consumption, investment, and output -- more broadly, the entire dynamic equation system of a model -- can be strongly influenced by alternative specifications of a reaction function describing the intertemporal behavior of a government's fiscal authority. The classes of fiscal rule studied -- debt-stock targeting, incremental interest payments (IIP), and the analytical benchmark of a balanced budget -- are described and discussed in the first paper in the series. The analysis demonstrates that the consequences of shocks or policy actions can be strongly conditioned by the intertemporal fiscal reaction function imposed on a macroeconomic model. Significant variation can occur for different types of rule, for alternative assumptions about the timing of the rule's activation, and for alternative values of the rule's feedback coefficients.
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Bibliographic InfoPaper provided by Brookings Institution - Working Papers in its series Papers with number 124.
Length: 27 pages
Date of creation: 1996
Date of revision:
Other versions of this item:
- Ralph C. Bryant & Long Zhang, 1996. "Alternative Specifications of Intertemporal Fiscal Policy in a Small Theoretical Model," Discussion Papers 124, Brookings Institution International Economics.
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
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