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Public-Debt/Output Guidelines: the Case of Israel

Author

Listed:
  • Zvi Hercowitz

    () (Tel-Aviv University, Bank of Israel)

  • Michel Strawczynski

    () (Bank of Israel)

Abstract

This paper analyzes the implications of adding to a tax-smoothing framework the cost of deviating upwards from a public-debt/output guideline. The implications for the dynamic paths of the tax rate, the debt/output ratio and the government spending/output ratio are derived. A simulation of the model with Israeli data suggests that Israeli fiscal behavior is consistent with the (implicit) existence of such a guideline. Some international perspective, with countries having explicit guidelines in the context of the Maastricht Treaty, is also presented.

Suggested Citation

  • Zvi Hercowitz & Michel Strawczynski, 2000. "Public-Debt/Output Guidelines: the Case of Israel," Bank of Israel Working Papers 2000.03, Bank of Israel.
  • Handle: RePEc:boi:wpaper:2000.03
    as

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    File Function: First version, 2000
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    References listed on IDEAS

    as
    1. Chari, V V & Christiano, Lawrence J & Kehoe, Patrick J, 1994. "Optimal Fiscal Policy in a Business Cycle Model," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 617-652, August.
    2. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
    3. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    Full references (including those not matched with items on IDEAS)

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