Balanced-budget rules and macroeconomic (in)stability

Debt Level and Fiscal Rules in Iran According to Budget Structural Reform

Oil-exporting countries often escalate macroeconomic fluctuations by adopting cyclical fiscal policies. Empirical evidence shows that the main reason of instability in oil-exporting countries is the poor management of oil. In this study, after introducing a small open macroeconomic model with a dual managed floating exchange rate regime and estimating it using quarterly macroeconomic data of Ir...

Investigate the Effects of Public Expenditure on Macroeconomic Variables under a Balanced Budget Rule in Iran: a DSGE Approach

Balanced Budgets and Business Cycles: Evidence from the States

This paper presents evidence that stringent balanced budget requirements enforced in some U.S. states have exacerbated business cycles in those states. The effect is not apparent directly. However, among states for which fiscal policy may have more macroeconomic consequences (large states), the difference in volatility between states with lenient and strict balanced budget rules is larger (more...

Useful Government Spending and Macroeconomic (In)stability under Balanced-Budget Rules∗

It has been shown that an otherwise standard one-sector real business cycle model may exhibit indeterminacy and sunspots under a balanced-budget rule that consists of fixed and wasteful government spending and proportional income taxation. However, the economy always displays saddle-path stability and equilibrium uniqueness if the government finances endogenous public expenditures with a consta...

Public debt and aggregate stability with endogenous growth and a state-dependent consumption tax

We analyze how different budgetary rules affect the stability of an economy in a basic endogenous growth model with public debt and a state-dependent consumption tax rate. We show that a discretionary policy implies that the government violates its inter-temporal budget constraint along a balanced growth path, whereas a balanced budget rule guarantees that the economy is stable. A rule based de...