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Reglas versus Discreción en la Política Fiscal: Introducción al caso Dominicano
[Rules vs Discretion in Fiscal Policy: An Introduction to the Case of the Dominican Republic]

Author

Listed:
  • Ovalle, Raul
  • Ramírez, Francisco A.

Abstract

The presence of deficit bias in fiscal policy, both at global as well as domestic level, has generated a debate around the viability of the adoption of fiscal rules to reduce such bias. In absence of an evaluation of this subject for the dominican case, this paper contributes to this discussion through the analysis of the impact of the introduction of different types of fiscal rules on macroeconomic volatility relative to the discretionary case. Results suggest that rules based on public expenditure adjustment, instead of taxes, reduce volatility. In contrast, fiscal balance objectives and limits on revenues introduce more validity, as the theory predict. This suggest that there is space for the modification of the current fiscal policy framenwork to one producing less macroeconomic uncertainty, considering the credible commitment of policymakers involved in the adoption of fiscal rules.

Suggested Citation

  • Ovalle, Raul & Ramírez, Francisco A., 2014. "Reglas versus Discreción en la Política Fiscal: Introducción al caso Dominicano [Rules vs Discretion in Fiscal Policy: An Introduction to the Case of the Dominican Republic]," MPRA Paper 68332, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:68332
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    File URL: https://mpra.ub.uni-muenchen.de/68332/1/MPRA_paper_68332.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal rules; Fiscal bias; DSGE Modelling;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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