Evaluating Fiscal Policy: A Rule of Thumb

• Autores: Nicolas Carnot
• Localización: Economic papers, ISSN 1725-3187, Nº. 526, 2014, págs. 1-48
• Idioma: inglés
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• Resumen

  • This paper introduces a simple rule for appraising the economic soundness of fiscal policies. It connects fiscal policy to a long-run debt objective, taken as an anchor, while arbitraging symmetrically between this debt objective and output stabilisation. The rule offers a benchmark to assess the evolution of primary expenditure, net of the impact of discretionary revenue measures, taken as a proper operational target for annual fiscal policy. The properties and implications of this rule of thumb are analysed drawing on qualitative arguments and retrospective simulations.