The Case for Fiscal Rules

Harald Badinger, Wolf Heinrich Reuter

Publikation: Working/Discussion PaperWU Working Paper

34 Downloads (Pure)

Abstract

This paper estimates the effects of fiscal institutions on fiscal policy outcomes, addressing issues related to measurement and endogeneity in a novel way. Recently developed indices, based on partially ordered set theory, are used to quantify the stringency of fiscal rules. Identification of their effects is achieved by exploiting the exogeneity of institutional variables (checks and balances, government fragmentation, inflation targeting), which are found to be relevant determinants of fiscal rules. Our two-stage least squares estimates for (up to) 79 countries over the period 1985-2012 provide strong evidence that countries with more stringent fiscal rules have higher fiscal balances (lower deficits), lower interest rate spreads on government bonds, and lower output volatility. (authors' abstract)
OriginalspracheEnglisch
PublikationsstatusVeröffentlicht - 2015

Publikationsreihe

NameDepartment of Economics Working Paper Series
Nr.204

Österreichische Systematik der Wissenschaftszweige (ÖFOS)

  • 502025 Ökonometrie
  • 502047 Volkswirtschaftstheorie
  • 506004 Europäische Integration
  • 502003 Außenhandel
  • 502018 Makroökonomie

WU Working Paper Reihe

  • Department of Economics Working Paper Series

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