Fiscal policy rules in a stock-flow consistent model

Fiscal Policy in a Stock - Flow Consistent ( SFC ) Model by Wynne Godley and Marc Lavoie * April 2007

Fiscal policy, long-run growth, and welfare in a stock-flow model of public goods

We introduce public capital and public services as inputs in an endogenous growth model. We show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services. When public spending is financed by proportional income taxes, the growth rate, the level of public spending as a proportion of GDP, the level of investm...

Simple, Implementable Fiscal Policy Rules

This paper analyzes the scope for systematic rules-based fiscal activism in open economies. Relative to a balanced budget rule, automatic stabilizers significantly improve welfare. But they minimize fiscal instrument volatility rather than business cycle volatility. A more aggressively countercyclical tax revenue gap rule increases welfare gains by around 50 percent, with only modest increases ...

Regime-changes in a Stock-flow-consistent Model

We explore the dynamical properties of the Godley-Lavoie model with a focus on Central Bank horizons. The stability properties of modes of regulation are traced from a regime of private bank money to the current crisis with the Central Bank levers of short-term bonds issue to the emerging policy regime of long-term bonds as built-in stabilizers.

Rules versus discretion in fiscal policy

This paper purports to apply the Kydland-Prescott framework of dynamic inconsistency to the case of fiscal policy, by considering the trade-off between output and debt stabilization. The Government budget constraint provides the link between debt dynamics and the level of activity, influenced by fiscal policy. Contrary to what happens in the monetary policy framework, however, a commitment is n...