Simple, Implementable Fiscal Policy Rules.

By: Kumhof, MichaelContributor(s): Laxton, DouglasMaterial type: TextTextSeries: IMF Working PapersPublisher: Washington : International Monetary Fund, 2009Copyright date: ©2009Description: 1 online resource (43 pages)Content type: text Media type: computer Carrier type: online resourceISBN: 9781451916584Subject(s): Economic policy | Fiscal policyGenre/Form: Electronic books.Additional physical formats: Print version:: Simple, Implementable Fiscal Policy RulesDDC classification: 332.152 LOC classification: HJ192.5 -- .K862 2009ebOnline resources: Click to View
Contents:
Intro -- Contents -- I. Introduction -- II. Literature Survey -- III. The Model -- A. Households -- 1. Infinitely Lived Households -- 2. Liquidity Constrained Households -- B. Manufacturing -- C. Copper Production -- D. Distribution -- E. Government -- 1. Monetary Policy -- 2. Fiscal Policy -- F. Fiscal Policy Rules -- 1. Chile's Structural Surplus Rule -- 2. A Tax Revenue Gap Targeting Rule -- 3. A Tax Revenue Gap Instrument Rule -- G. Shocks -- H. Equilibrium and Balance of Payments -- I. Computation of Welfare -- IV. Calibration -- A. Steady State -- B. Policy Rules, Adjustment Costs and Shocks -- V. Results -- A. Monetary Rules -- B. Impulse Responses -- C. Welfare -- D. Fiscal Instrument Volatility -- E. Welfare - Fiscal Instrument Volatility Efficiency Frontiers -- F. Macroeconomic Volatility -- G. Other Real Activity Gaps? -- H. Openness -- I. Alternative Fiscal Instruments -- VI. Conclusion -- Appendices -- 1. Optimality Conditions of the Model -- 2. Welfare Computations -- References -- Tables -- 1. Key Moments of the Data -- Figures -- 1. IRF for Technology Shock -- 2. IRF for Investment Shock -- 3. IRF for Copper Demand Shock -- 4. Welfare for Tax Revenue Gap Rule -- 5. Fiscal Instrument Volatility for Tax Revenue Gap Rule -- 6. Efficiency Frontiers -- 7. Macroeconomic Volatility for Tax Revenue Gap Rule -- 8. Openness -- 9. Welfare and Fiscal Instruments -- 10. Fiscal Volatility for Different Fiscal Instruments.
Summary: This paper analyzes the scope for systematic rules-based fiscal activism in open economies. Relative to a balanced budget rule, automatic stabilizers significantly improve welfare. But they minimize fiscal instrument volatility rather than business cycle volatility. A more aggressively countercyclical tax revenue gap rule increases welfare gains by around 50 percent, with only modest increases in fiscal instrument volatility. For raw materials revenue gaps the government should let automatic stabilizers work. The best fiscal instruments are targeted transfers, consumption taxes and labor taxes, or, if it enters private utility, government spending. The welfare gains are significantly lower for more open economies.
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Intro -- Contents -- I. Introduction -- II. Literature Survey -- III. The Model -- A. Households -- 1. Infinitely Lived Households -- 2. Liquidity Constrained Households -- B. Manufacturing -- C. Copper Production -- D. Distribution -- E. Government -- 1. Monetary Policy -- 2. Fiscal Policy -- F. Fiscal Policy Rules -- 1. Chile's Structural Surplus Rule -- 2. A Tax Revenue Gap Targeting Rule -- 3. A Tax Revenue Gap Instrument Rule -- G. Shocks -- H. Equilibrium and Balance of Payments -- I. Computation of Welfare -- IV. Calibration -- A. Steady State -- B. Policy Rules, Adjustment Costs and Shocks -- V. Results -- A. Monetary Rules -- B. Impulse Responses -- C. Welfare -- D. Fiscal Instrument Volatility -- E. Welfare - Fiscal Instrument Volatility Efficiency Frontiers -- F. Macroeconomic Volatility -- G. Other Real Activity Gaps? -- H. Openness -- I. Alternative Fiscal Instruments -- VI. Conclusion -- Appendices -- 1. Optimality Conditions of the Model -- 2. Welfare Computations -- References -- Tables -- 1. Key Moments of the Data -- Figures -- 1. IRF for Technology Shock -- 2. IRF for Investment Shock -- 3. IRF for Copper Demand Shock -- 4. Welfare for Tax Revenue Gap Rule -- 5. Fiscal Instrument Volatility for Tax Revenue Gap Rule -- 6. Efficiency Frontiers -- 7. Macroeconomic Volatility for Tax Revenue Gap Rule -- 8. Openness -- 9. Welfare and Fiscal Instruments -- 10. Fiscal Volatility for Different Fiscal Instruments.

This paper analyzes the scope for systematic rules-based fiscal activism in open economies. Relative to a balanced budget rule, automatic stabilizers significantly improve welfare. But they minimize fiscal instrument volatility rather than business cycle volatility. A more aggressively countercyclical tax revenue gap rule increases welfare gains by around 50 percent, with only modest increases in fiscal instrument volatility. For raw materials revenue gaps the government should let automatic stabilizers work. The best fiscal instruments are targeted transfers, consumption taxes and labor taxes, or, if it enters private utility, government spending. The welfare gains are significantly lower for more open economies.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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