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The analysis of budget rules and macroeconomic implications in several developed economies

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  • Popescu, Razvan-Florin
  • Prodan, Sergiu

Abstract

The purpose of budget rules can be explored from the perspective of the expected results, obtained by their enforcement. On one hand, they are meant to improve or at least maintain certain levels of the budgetary deficit and public debt. On the other hand, they can help or limit the economic development perspectives of states, influencing important macroeconomic variables. Starting with the evolution of the budgetary deficit, under the hypothesis that the most important determinant lies within the budget rules implementation process, this analysis is focused on the influence of several budget rules on the nominal interest rate. Our motivation is based on the need to present the differences between the analyzed countries in order to reveal if there were effects from the recession periods. The numeric part was made using panel data from eight west European countries along with Australia and New Zeeland. The analysis is compound of a two method estimation of the relationship between nominal interest rate and several factors that are strongly connected with the budget rules.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25897.

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Date of creation: 2010
Date of revision: 2010
Publication status: Published in Budgetary Research Review 2/2010.2(2010): pp. 60-91
Handle: RePEc:pra:mprapa:25897

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Keywords: budgetary deficit; public debt; interest rate; golden rule of public finance;

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  1. Ari Aisen & David Hauner, 2008. "Budget Deficits and Interest Rates: A Fresh Perspective," IMF Working Papers 08/42, International Monetary Fund.
  2. Jeffrey M. Wooldridge, 2001. "Applications of Generalized Method of Moments Estimation," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 87-100, Fall.
  3. Michael Dothan & Fred Thompson, 2009. "A better budget rule," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 28(3), pages 463-478.
  4. Jér�me Creel & Paola Monperrus-Veroni & Francesco Saraceno, 2009. "On The Long-Term Effects Of Fiscal Policy In The United Kingdom: The Case For A Golden Rule," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(5), pages 580-607, November.
  5. Jerome Creel & Etienne Farvaque, 2009. "The political economy of balanced-budget rules," Documents de Travail de l'OFCE 2009-06, Observatoire Francais des Conjonctures Economiques (OFCE).
  6. Corsetti, Giancarlo & Roubini, Nouriel, 1996. "European versus American Perspectives on Balanced-Budget Rules," American Economic Review, American Economic Association, vol. 86(2), pages 408-13, May.
  7. Michael Kell, 2001. "An Assessment of Fiscal Rules in the United Kingdom," IMF Working Papers 01/91, International Monetary Fund.
  8. Alan J. Auerbach, 2008. "Federal Budget Rules: The US Experience," NBER Working Papers 14288, National Bureau of Economic Research, Inc.
  9. James M. Poterba, 1997. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc.
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