Ferriere, Axelle
Fiscal austerity in ambiguous times / by Axelle Ferriere and Anastasios G. Karantounias .-- , 2019
Resumen.
Bibliografía.
This paper analyzes optimal fiscal policy with ambiguity aversion
and endogenous government spending. We show that without
ambiguity, optimal surplus-to-output ratios are acyclical and that
there is no rationale for either reduction or further accumulation
of public debt. In contrast, ambiguity about the cycle can generate optimally policies that resemble “austerity” measures. Optimal policy prescribes higher taxes in adverse times and front-loaded fiscal consolidations that lead to a balanced primary budget in the long run. This is the case when interest rates are sufficiently responsive to cyclical shocks, that is, when the intertemporal elasticity of substitution is sufficiently low.
POLITICA FISCAL
GASTO PUBLICO
REDUCCION
PRESUPUESTOS
MODELOS ECONOMETRICOS
Karantounias, Anastasios G.
American Economic Journal. Macroeconomics 1945-7707 v. 11, n. 1, January 2019, p. 89-131
Fiscal austerity in ambiguous times / by Axelle Ferriere and Anastasios G. Karantounias .-- , 2019
Resumen.
Bibliografía.
This paper analyzes optimal fiscal policy with ambiguity aversion
and endogenous government spending. We show that without
ambiguity, optimal surplus-to-output ratios are acyclical and that
there is no rationale for either reduction or further accumulation
of public debt. In contrast, ambiguity about the cycle can generate optimally policies that resemble “austerity” measures. Optimal policy prescribes higher taxes in adverse times and front-loaded fiscal consolidations that lead to a balanced primary budget in the long run. This is the case when interest rates are sufficiently responsive to cyclical shocks, that is, when the intertemporal elasticity of substitution is sufficiently low.
POLITICA FISCAL
GASTO PUBLICO
REDUCCION
PRESUPUESTOS
MODELOS ECONOMETRICOS
Karantounias, Anastasios G.
American Economic Journal. Macroeconomics 1945-7707 v. 11, n. 1, January 2019, p. 89-131