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A simple approach to balancing government budgets over the business cycle

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  • Erick Michael Elder
  • Gary A. Wagner

Abstract

Despite the renewed interest in fiscal rules to constrain government deficits and debt, most rules provide no guidelines for reaching fiscal objectives in practice. This note demonstrates how to construct simple and transparent savings-rate rules that could aid policymakers if balancing the budget over the business cycle is a goal.

Suggested Citation

  • Erick Michael Elder & Gary A. Wagner, 2012. "A simple approach to balancing government budgets over the business cycle," Applied Economics Letters, Taylor & Francis Journals, vol. 19(7), pages 677-681, May.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:7:p:677-681
    DOI: 10.1080/13504851.2011.595672
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    References listed on IDEAS

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    1. Thomas Garrett, 2009. "Evaluating state tax revenue variability: a portfolio approach," Applied Economics Letters, Taylor & Francis Journals, vol. 16(3), pages 243-246.
    2. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    3. Chang-Jin Kim & Charles R. Nelson, 1998. "Business Cycle Turning Points, A New Coincident Index, And Tests Of Duration Dependence Based On A Dynamic Factor Model With Regime Switching," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 188-201, May.
    4. Goodwin, Thomas H, 1993. "Business-Cycle Analysis with a Markov-Switching Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 331-339, July.
    5. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, December.
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