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Measuring compliance with the Golden Rule


  • Marc Robinson


The golden rule of public finance is based upon the notion that intergenerational equity requires that the cost of public expenditures be spread over time in a manner that reflects the intertemporal distribution of the benefits generated by those expenditures. This is often translated into a rule that the budget be structurally balanced in accrual accounting terms. This article considers the form of accrual accounting that is most suited to the task of measuring the consistency of fiscal policy with the golden rule. It recommends a combination of the real capital maintenance approach (also known as ‘current purchasing power accounting’) and annuity depreciation. Such an approach differs from ‘current cost accounting’, which has dominated public sector models of accrual accounting in recent years. The meaning of balance-sheet measures is also considered, and it is concluded that the golden rule is more appropriately expressed as an accrual balanced budget requirement than as a requirement for the maintenance of constant net worth.

Suggested Citation

  • Marc Robinson, 1998. "Measuring compliance with the Golden Rule," Fiscal Studies, Institute for Fiscal Studies, vol. 19(4), pages 447-462, November.
  • Handle: RePEc:ifs:fistud:v:19:y:1998:i:4:p:447-462

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    References listed on IDEAS

    1. Whittington,Geoffrey, 1983. "Inflation Accounting," Cambridge Books, Cambridge University Press, number 9780521270557, March.
    2. Boskin, Michael J, 1982. "Federal Government Deficits: Some Myths and Realities," American Economic Review, American Economic Association, vol. 72(2), pages 296-303, May.
    3. Willem H. Buiter, 1990. "Principles of Budgetary and Financial Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524139, July.
    4. Feldstein, Martin S, 1976. "Perceived Wealth in Bonds and Social Security: A Comment," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 331-336, April.
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    Cited by:

    1. Marc Robinson, 2000. "Accrual Financial Reporting and Australian Fiscal Policy," School of Economics and Finance Discussion Papers and Working Papers Series 084, School of Economics and Finance, Queensland University of Technology.
    2. Marc Robinson, 2000. "Accrual Accounting And The Public Sector," School of Economics and Finance Discussion Papers and Working Papers Series 086, School of Economics and Finance, Queensland University of Technology.
    3. Marc Robinson, 1999. "Accrual Financial Reporting In the Australian Public Sector: An Economic Perspective," School of Economics and Finance Discussion Papers and Working Papers Series 065, School of Economics and Finance, Queensland University of Technology.
    4. Kellermann, Kersten, 2007. "Debt financing of public investment: On a popular misinterpretation of "the golden rule of public sector borrowing"," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1088-1104, December.
    5. Mark Christensen, 2007. "What We Might Know (But Aren't Sure) About Public-Sector Accrual Accounting," Australian Accounting Review, CPA Australia, vol. 17(41), pages 51-65, March.
    6. Koch, Daniel, 2011. "Wirksame Begrenzung von Staatsverschuldung auf europäischer Ebene," Discussion Paper Series 114, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.

    More about this item

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General


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