This paper considers a new framework for achieving fiscal discipline. The key idea is an inter-temporal assignment where regional fiscal policies focus on long-term objectives and federal monetary policies on short-term objectives. For practical implementation purposes, fiscal policy is stated in terms of a target for public debt relative to GDP. The result is a self-stabilizing framework in which the enforcement problem simplifies to checking if a certain primary surplus rule is being followed period by period.
|Journal||Public Finance and Management|
|Publication status||Published - 2012|