This article derives optimal fiscal rules within a stochastic model of Keynesian type in the context of Poole (1970) analysis. By using optimal control theory and applying the Hamilton-Jacoby-Bellman equation, we extend the original Poole results concerning the output stabilization properties of monetary policy to the case of fiscal policy. In particular, we look for the optimal setting of gove...

In this study, a macro-economic model consisting of twelve behavioral equations and fourteen identity equations was estimated with the aim of investigating the effectiveness of monetary and fiscal policies set out in the fourth and fifth development plans. In the estimated model, the variables of development expenditures, current expenditures and tax revenues are used as fiscal policy tools and...

After nearly a quarter century of large budget deficits—causing the public debt to double from 20 percent to 42 percent as a share of GDP in the industrialized countries—the need for greater fiscal discipline appears to be reaching a consensus. Last spring a balanced budget amendment to the U.S. Constitution passed in the House of Representatives and came close to passing in the Senate—a swing ...