Choice of The Fiscal Rules in The Long Run

Michał Mackiewicz

doi:10.18778/1508-2008.7.06

Authors

Michał Mackiewicz

DOI:

https://doi.org/10.18778/1508-2008.7.06

Abstract

Paper examines the problem of choice of an optimal fiscal rule in the long run. An ideal rule would typically assure fair distribution of utility over generations, while allowing to maintain the sustainable fiscal position. Three commonly used types: debt, deficit and expenditure rules are considered. The main conclusion is that only the modified deficit rule fulfils the assumptions. The rule requires that government’s policy should aim at keeping the debt-to-GDP ratio constant over the economic cycle.

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