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Credibility and Bias
Marcela de Castro-Valderrama
Nicolás Moreno-Arias
Juan José Ospina-Tejeiro
其他書名
The Case for Implementing Both a Debt Anchor and a Balanced Budget Rule
出版
Graduate Institute of International and Development Studies, International Economics Department
, 2023
URL
http://books.google.com.hk/books?id=pysM0AEACAAJ&hl=&source=gbs_api
註釋
Should a government have more than one fiscal rule constraining fiscal aggregates? If so, why? In this paper, we present a dynamic general equilibrium model of a small open economy featuring an incumbent government to assess how and why implementing a budget balance rule and a debt anchor rule is non-redundant and welfare-improving. Our findings suggest that the implementation of a combination of fiscal rules is optimally preferred over a single rule, as each rule has a different effect on credibility and fiscal behaviour. While the debt anchor rule prevents the propagation of the negative effects of imperfect fiscal credibility, the operational rule reduces amplification by avoiding overindebtedness and minimizing the welfare-detrimental effects arising from a deficit-biased government.