The Costs and Benefits of Fiscal Rules: Evidence from U.S. States

16 Pages Posted: 27 Jun 2000

See all articles by Alberto F. Alesina

Alberto F. Alesina

Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Date Written: June 1996

Abstract

This paper shows that in American states balanced budget rules are effective in enforcing fiscal discipline but they have no costs in terms of increased output variability. More specifically, we show that tighter fiscal rules are associated with larger average surplus and lower cyclical variability of the budget balance. However, the lower flexibility of the budget balance does not affect state output variability.

Suggested Citation

Alesina, Alberto F. and Bayoumi, Tamim, The Costs and Benefits of Fiscal Rules: Evidence from U.S. States (June 1996). NBER Working Paper No. w5614. Available at SSRN: https://ssrn.com/abstract=225551

Alberto F. Alesina (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-8388 (Phone)
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tamim Bayoumi

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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