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Title:A Golden Rule of Public Finance or a Fixed Deficit Regime? Growth and Welfare Effects of Budget Rules PDF Logo
Authors:Groneck, Max
Issue Date:2008
Series/Report no.:Finanzwissenschaftliche Diskussionsbeiträge / Finanzwissenschaftliches Forschungsinstitut an der Universität zu Köln 08-7
Abstract:In this paper, we compare growth and welfare e¤ects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that a fixed deficit regime does not affect the long run growth rate compared to a balanced budget while the growth rate is increased by a golden rule. Welfare effects are ambiguous. Simulations indicate that economies populated by households who have a strong tendency to smooth consumption should adhere to a balanced budget rather than a golden rule or a fixed deficit rule from a welfare point of view.
Subjects:Budget rules
golden rule of public finance
fiscal policy
endogenous growth
welfare
JEL:E62
H63
O40
H50
H62
Document Type:Working Paper
Appears in Collections:FiFo Discussion Papers, Finanzwissenschaftliches Forschungsinstitut, Universität Köln

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