IDEAS home Printed from https://ideas.repec.org/a/spr/joecth/v4y1994i3p401-16.html
   My bibliography  Save this article

Fiscal Rules and Extrinsic Uncertainty

Author

Listed:
  • Goenka, Aditya

Abstract

This paper analyzes the effect of two fiscal policy regimes on the set of equilibria. A general equilibrium model with public goods is used to re-examine Friedman's proposal for fiscal reform. The issue is whether a constraint upon fiscal policy requiring budget balance under all contingencies increases the stability of the economy. Stability is modelled in terms of neutralizing extrinsic uncertainty or sunspots. The government consists of bureaus providing public goods. The budgetary rules entail fixed shares of revenues and arrangements for budget balancing. Existence of equilibrium and properties of the equilibrium set are established. The Friedmanite rules permit extrinsic uncertainty to affect outcomes, while a policy that allows the bureaus greater discretion in the pursuit of their objectives neutralizes it.

Suggested Citation

  • Goenka, Aditya, 1994. "Fiscal Rules and Extrinsic Uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 401-416, May.
    • Handle: RePEc:spr:joecth:v:4:y:1994:i:3:p:401-16
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

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


    Cited by:

    1. Goenka, Aditya & Prechac, Christophe, 2006. "Stabilizing sunspots," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 544-555, August.
    2. Hervé Crès, 1996. "Symmetric Smooth Consumption Externalities," SciencePo Working papers Main hal-03598166, HAL.
    3. Huberto M. Ennis & Todd Keister, 2001. "Optimal policy with probabilistic equilibrium selection," Working Paper 01-03, Federal Reserve Bank of Richmond.
    4. Aditya Goenka & Saqib Jafarey & William Pouliot, 2012. "Pollution, Mortality and Optimal Environmental Policy," Discussion Papers 12-05, Department of Economics, University of Birmingham.
    5. repec:hal:spmain:info:hdl:2441/10274 is not listed on IDEAS
    6. Marta Aloi & Hans Jorgen Jacobsen & Teresa Lloyd Braga, 1998. "Endogenous business cycles and stabilization policies," Economics Working Papers 476, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2000.
    7. Erkki Koskela & Mikko Puhakka, 2003. "Stabilizing Competitive Cycles with Distortionary Taxation," CESifo Working Paper Series 947, CESifo.
    8. Boschi, Melisso & Goenka, Aditya, 2012. "Relative risk aversion and the transmission of financial crises," Journal of Economic Dynamics and Control, Elsevier, vol. 36(1), pages 85-99.
    9. Keister, Todd, 1998. "Money Taxes and Efficiency When Sunspots Matter," Journal of Economic Theory, Elsevier, vol. 83(1), pages 43-68, November.
    10. Hervé Crès, 1996. "Symmetric Smooth Consumption Externalities," Sciences Po publications info:hdl:2441/10274, Sciences Po.
    11. Erkki Koskela & Mikko Puhakka, 2006. "Indeterminacy and Stabilization of Endogenous Cycles with Balanced-Budget Distortionary Taxation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(2), pages 149-167, June.
    12. Ghiglino, Christian & Shell, Karl, 2000. "The Economic Effects of Restrictions on Government Budget Deficits," Journal of Economic Theory, Elsevier, vol. 94(1), pages 106-137, September.
    13. Goenka, Aditya & Jafarey, Saqib & Pouliot, William, 2020. "Pollution, mortality and time consistent abatement taxes," Journal of Mathematical Economics, Elsevier, vol. 88(C), pages 1-15.
    14. Grüner, Hans Peter, 2017. "Mechanisms for the control of fiscal deficits," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 133-152.
    15. Hervé Crès, 1996. "Symmetric Smooth Consumption Externalities," SciencePo Working papers hal-03598166, HAL.
    16. Guo, Jang-Ting & Lansing, Kevin J., 2002. "Fiscal Policy, Increasing Returns, And Endogenous Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 6(5), pages 633-664, November.
    17. Chu, Angus C. & Liao, Chih-Hsing & Liu, Xiangbo & Zhang, Mengbo, 2021. "Indeterminacy in a matching model of money with productive government expenditure," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 497-516.
    18. Aditya Goenka, 2004. "Non-Fungibility and Mental Accounting: A Model of Bounded Rationality with Sunspot," Econometric Society 2004 Australasian Meetings 234, Econometric Society.
    19. Hervé Crès, 1996. "Symmetric Smooth Consumption Externalities," Post-Print hal-03598166, HAL.
    20. Aditya Goenka & Stefano Matta, 2008. "Manipulation of endowments and sunspot equilibria," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(2), pages 267-282, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joecth:v:4:y:1994:i:3:p:401-16. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.