Fiscal Rules in a Volatile World: A Welfare-Based Approach

By Jorge Restrepo, Carlos Garcia, Evan C Tanner

March 1, 2011

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Format: Chicago

Jorge Restrepo, Carlos Garcia, and Evan C Tanner. Fiscal Rules in a Volatile World: A Welfare-Based Approach, (USA: International Monetary Fund, 2011) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

It is widely agreed that a fiscal rule should boost discipline and credibility, reduce macroeconomic volatility, and be easily understood. To support such goals, a government may run structural surpluses and accumulate a precautionary cushion of assets on behalf of agents who do not enjoy access to capital markets. As an additional criterion, that level of assets should be bounded. We provide an example of a structural surplus rule that satisfies all such criteria. In our general equilibrium simulations, we show that such a rule benefits credit-constrained consumers but may hurt others.

Subject: Commodity prices, Consumption, Expenditure, Fiscal rules, Public debt

Keywords: Structural surplus, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/056
Stock No:

WPIEA2011056
ISBN:

9781455221004
ISSN:

1018-5941

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