On the Long‐term Effects of Fiscal Policy in the United Kingdom: The Case for a Golden Rule

Creel, Jérôme; Monperrus-Veroni, Paola; Saraceno, Francesco

doi:10.1111/j.1467-9485.2009.00499.x

Cited by 18 publications

(14 citation statements)

References 25 publications

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“…This finding is also shared by the European Commission (2012), which indicates that the fiscal multiplier is larger if fiscal consolidation is based on public expenditure, and in particular on public investment. These results confirm those published about fiscal stimulus by the OECD (2009), Creel et al (2009), Burriel et al (2010), and Baum and Koester (2011). Without invalidating this result, a study by Fazzari et al (2012) nevertheless introduced a nuance: according to 6.…”

Section: Fiscal Multiplier In Times Of Crisis: a Short Overviewsupporting

confidence: 92%

Fiscal consolidation in times of crisis: is the sooner really the better?

Blot¹,

Cochard²,

Creel³

et al. 2014

Revue De l'OFCE

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Recent evidence has renewed views on the size of fiscal multipliers. It is notably emphasized that fiscal multipliers are higher in times of crisis. Starting from this literature, we develop a simple and tractable model to deal with the fiscal strategy led by euro area countries. Constrained by fiscal rules and by speculative attacks in financial markets, euro area members have adopted restrictive fiscal policies despite strong negative output gaps. Based on the model, we present simulations to determine the path of public debt given the current expected consolidation. Our simulations suggest that despite strong austerity measures, not all countries would be able to reach the 60% debt-to-GDP. If fiscal multipliers vary along the business cycle, this would give a strong case for delaying austerity. This alternative scenario is considered. Our results show not only that delaying austerity would improve growth perspectives and would not be incompatible with public debt converging to 60% of GDP.

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Section: Fiscal Multiplier In Times Of Crisis: a Short Overviewsupporting

confidence: 92%

Fiscal consolidation in times of crisis: is the sooner really the better?

Blot¹,

Cochard²,

Creel³

et al. 2014

Revue De l'OFCE

Self Cite

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“…Along with this rule, Great Britain has enforced a law that prevents over-investing (Creel, Veroni and Saraceno, 2009). To be more specific, the level of public debt in respect to the GDP has to be kept at a prudent and stable level 7 .…”

Section: A) the Golden Rule Of Public Financementioning

confidence: 99%

The Analysis of Budget Rules and Macroeconomic Implications in Several Developed Economies

Popescu

Prodan

2010

SSRN Journal

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The purpose of budget rules can be explored from the perspective of the expected results, obtained by their enforcement. On one hand, they are meant to improve or at least maintain certain levels of the budgetary deficit and public debt. On the other hand, they can help or limit the economic development perspectives of states, influencing important macroeconomic variables. Starting with the evolution of the budgetary deficit, under the hypothesis that the most important determinant lies within the budget rules implementation process, this analysis is focused on the influence of several budget rules on the nominal interest rate. Our motivation is based on the need to present the differences between the analyzed countries in order to reveal if there were effects from the recession periods. The numeric part was made using panel data from eight west European countries along with Australia and New Zeeland. The analysis is compound of a two method estimation of the relationship between nominal interest rate and several factors that are strongly connected with the budget rules.

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“…. The path of evolution for both categories of spending does not change, as the total resource constraint is not modified P (e t + i t ) = 2 (see equations (7) and (8)).…”

Section: The Golden Rulementioning

confidence: 99%

“…UK authorities are therefore provided with a countercyclical short run fiscal policy and with a structural long run policy. According to empirical estimations by Creel et al (2009), the 'golden rule of public finance' has also been successful in increasing the multiplier effect of public investment on GDP. However, and quite interestingly for our purpose, the adoption of golden rules has not spread over the world despite their potential advantages, historically endorsed by academics since at least Pigou (1928) and Musgrave (1939).…”

Section: Introductionmentioning

confidence: 99%

The Political Economy of Balanced-Budget Rules

Creel

Farvaque

2009

SSRN Journal

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The paper first reviews the evolution of federal fiscal rules in the United States, showing a trend towards balanced-budget rules, not golden rules. An explanation to this trend is provided in a model that includes voter's preferences that are skewed by the history of the budget structure, and fiscal rules on the budget. Previous results in the literature are generalized, and the implications of fiscal rules for the use of debt as a strategic asset in the hands of politicians are derived. The inclusion of a golden rule of public finance is compared with that of a balanced-budget rule. Because of the presence of habits, we show that politicians are more prone to adopt balanced-budget rules than a golden rule.

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On the Long‐term Effects of Fiscal Policy in the United Kingdom: The Case for a Golden Rule

Cited by 18 publications

References 25 publications

Fiscal consolidation in times of crisis: is the sooner really the better?

Fiscal consolidation in times of crisis: is the sooner really the better?

The Analysis of Budget Rules and Macroeconomic Implications in Several Developed Economies

The Political Economy of Balanced-Budget Rules

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