Dovis, Alessandro
Fiscal rules, bailouts, and reputation in federal governments / Alessandro Dovis and Rishabh Kirpalani .-- , 2020
Bibliografía
Expectations of transfers by central governments incentivize overborrowing by local governments. In this paper, we ask if fiscal rules can reduce overborrowing if central governments cannot commit. We study a model in which the central government’s type is unknown and show that fiscal rules increase overborrowing if the central government’s reputation is low. In contrast, fiscal rules are effective in lowering debt if the central government’s reputation is high. Even when the central government’s reputation is low, binding fiscal rules will arise in the equilibrium of a signaling game.
TRIBUTOS LOCALES
POLITICA FISCAL
Kirpalani, Rishabh
The American Economic Review 0002-8282volume 110, number 3, march 2020, p. 860-888
Fiscal rules, bailouts, and reputation in federal governments / Alessandro Dovis and Rishabh Kirpalani .-- , 2020
Bibliografía
Expectations of transfers by central governments incentivize overborrowing by local governments. In this paper, we ask if fiscal rules can reduce overborrowing if central governments cannot commit. We study a model in which the central government’s type is unknown and show that fiscal rules increase overborrowing if the central government’s reputation is low. In contrast, fiscal rules are effective in lowering debt if the central government’s reputation is high. Even when the central government’s reputation is low, binding fiscal rules will arise in the equilibrium of a signaling game.
TRIBUTOS LOCALES
POLITICA FISCAL
Kirpalani, Rishabh
The American Economic Review 0002-8282volume 110, number 3, march 2020, p. 860-888