Rethinking fiscal rules
Metadata
Show full item recordEditorial
Elsevier
Materia
Fiscal policy Infrastructure Public spending Public deficit Debt limits
Date
2023-03-10Referencia bibliográfica
L. Carranza-Ugarte et al. Rethinking fiscal rules. Journal of Comparative Economics 51 (2023) 833–857[https://doi.org/10.1016/j.jce.2023.02.005]
Sponsorship
Spanish State Research Agency through project PID2021-127119NB-I00; ERDF A way of making Europe; Spanish State Research Agency through project PID2019-110783GB-I00/AEI/10.13039/501100011033Abstract
The Covid 19 pandemic has caused both a decrease in tax revenues and an increase in public
spending, forcing governments to increase fiscal deficits to unprecedented levels. Given these
circumstances, it is foreseeable that fiscal rules will play a predominant role in the design of
many countries’ recovery policies. We develop a general equilibrium, overlapping generations
model for a small, open economy in order to study the impact of several fiscal rules upon
welfare, public expenditures and growth. We calibrate the model to the Peruvian economy. In
this economy, fiscal rules have been widely used and, unlike in other Latin American countries,
they have been relatively successful. We find that fiscal rules will generate better results in
terms of output if, in addition to maintaining control over the fiscal result, they also preserve
public investment. We also find that the performance of economies that implement structural
rules tends to be better than the performance of economies that implement rules based on
realized budget balance.