Design Choices for Fiscal Policy Rules

44 Pages Posted: 14 Feb 2012

See all articles by Barry Anderson

Barry Anderson

Independent

Joseph J. Minarik

Committee for Economic Development

Date Written: March 29, 2007

Abstract

This article discusses issues regarding budget process rules in the context of the current pattern of rising fiscal deficits. It begins by explaining the premise that budget process rules have multiple objectives, and so must be judged according to multiple criteria. Prominent among those criteria, given the apparent economic sluggishness of the early years of the 1990s and the resulting fiscal deficits, are how any particular set of rules might facilitate economic recovery and growth, but also maintain fiscal responsibility and public credibility. This discussion is pertinent to both the euro area countries and the United States, and the article explores aspects of the European Union Stability and Growth Pact and the United States Gramm-Rudman-Hollings system. The article then proceeds to analyse alternative fiscal control measures according to these and other criteria, such as the ability to maintain sound core operations of government to attain all of its long-standing policy objectives, including the funding of public investment. The article concludes by weighing the alternative rules against these criteria.

Suggested Citation

Anderson, Barry and Minarik, Joseph J., Design Choices for Fiscal Policy Rules (March 29, 2007). Available at SSRN: https://ssrn.com/abstract=2004407 or http://dx.doi.org/10.2139/ssrn.2004407

Joseph J. Minarik

Committee for Economic Development ( email )

Register to save articles to
your library

Register

Paper statistics

Downloads
231
Abstract Views
1,041
rank
132,483
PlumX Metrics