Is there a Case for Sophisticated Balanced-Budget Rules?

This file is part of IDEAS, which uses RePEc data

Is there a Case for Sophisticated Balanced-Budget Rules?

Author Info

Antonio Fatás ()

Additional information is available for the following registered author(s):

Antonio Fatas

Abstract

This paper reviews the arguments in favor of excluding investment from fiscal policy constraints (the adoption of a “golden rule”). The paper starts by reviewing the goals and motivations of fiscal policy rules. From this analysis, it is clear that answering the question of whether investment should be excluded from those constraints can only be done once the goals and logic of those constraints are made clear. The strongest arguments in favor of a “golden rule” are those of transparency and intergenerational fairness. Other arguments, such as the possibility that public investment pays for itself, do not receive strong empirical support. The paper concludes that for a policy rule to be sustainable and have enough political and public support, it is necessary to have a proper, transparent and, therefore, different accounting treatment for investment. Whether this implies that investment should be completely excluded from fiscal policy constraints is left as an open question.

Les arguments en faveur de règles sophistiquées d’équilibre budgétaires sont-ils légitimes?
Cet article analyse les arguments en faveur de l'exclusion de l'investissement des contraintes de politique budgétaire (adoption d'une « règle d’or »). Il commence par passer en revue les buts et les motivations des règles de politique budgétaire. Il en ressort qu'avant de pouvoir répondre à la question de savoir si oui ou non l'investissement doit être exclu de ces contraintes, il est essentiel que les buts et la logique qui les sous-tendent soient clairement énoncés. Les arguments les plus solides en faveur d'une "règle d'or" sont ceux de la transparence et de l'équité transgénérationnelle. D'autres arguments, tels que le fait que l'investissement s'autofinancerait, ne reçoivent pas beaucoup de validation empirique. L’auteur en conclut que pour qu'une règle budgétaire soit soutenable et reçoive suffisamment de soutien des acteurs politiques et de la population, il est nécessaire que l'investissement fasse l'objet d'un traitement comptable spécifique, transparent et par conséquent différent. La question de savoir si cela implique que l'investissement soit complètement exclu des contraintes de politique budgétaire reste une question ouverte.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

Publisher Info
Paper provided by OECD Economics Department in its series OECD Economics Department Working Papers with number 466.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 12 Dec 2005
Date of revision:
Handle: RePEc:oec:ecoaaa:466-en

Contact details of provider:
Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
Email:
Web page: http://www.oecd.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-01-01 (All new papers)
NEP-MAC-2006-01-01 (Macroeconomics)
NEP-PBE-2006-01-01 (Public Economics)

Cited by:
(explanations, 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.)

Leopold Diebalek & Walpurga Koehler-Toeglhofer & Doris Prammer, 2006. "Reform of the Stability and Growth Pact," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 78-109, May 2006. [Downloadable!]

Statistics

Access and download statistics

Did you know? IDEAS is not the only service displaying RePEc data. Choose on RePEc which service fits your needs best.

This page was last updated on 2008-11-17.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.