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Title:Fiscal Policy Rules for Stabilisation and Growth : A Simulation Analysis of Deficit and Expenditure Targets in a Monetary Union PDF Logo
Authors:Brück, Tilman
Zwiener, Rudolf
Issue Date:2004
Series/Report no.:DIW-Diskussionspapiere 427
Abstract:We analyse the effectiveness of fiscal policy rules for business cycle stabilisation in a monetary union using a quarterly macro-econometric model of Germany. The simulations compare a deficit target and an expenditure target under a range of supply, demand and fiscal shocks. Their effects are evaluated by their impact on prices and output. The analysis demonstrates that in general the deficit target of the stability pact leads to less stabilisation than an expenditure target. The results suggest that the deficit rule of the stability pact should be replaced with an expenditure rule augmented by medium-term debt targets.
Subjects:fiscal policy
international policy coordination
simulation
JEL:F42
E62
E37
Document Type:Working Paper
Appears in Collections:DIW-Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW

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