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UID:04601c10b5280f4b08215ccb803a14ee
CATEGORIES:Seminars
CREATED:20150504T182948
SUMMARY:Lunch Seminar: Pierre Yared - Columbia University
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Fiscal Rules and Discretion in a World Economy\nAbstract:\nWe consider a wo
 rld economy in which all governments have time-inconsistent preferences wit
 h a present-bias toward government spending. Fiscal rules are borrowing lim
 its which trade off the desire to commit to not overspend against the desir
 e to have flexibility to react to shocks to the value of spending. We compa
 re fiscal rules which are decentralized and independently chosen by each co
 untry to fiscal rules which are centralized and chosen jointly by all count
 ries. In contrast to decentralized rules, centralized rules take into accou
 nt that less flexibility affects all countries by reducing global interest 
 rates. If the present bias is low, centralized rules are tighter than decen
 tralized ones since countries choosing rules independently do not internali
 ze the redistributive effect of lower interest rates. In contrast, if the p
 resent bias is high, centralized rules are slacker than decentralized ones 
 since countries choosing rules independently do not internalize the discipl
 ining effect of higher interest rates. In this case, if a subset of countri
 es can freely adopt tighter rules than those imposed centrally, then intere
 st rates decline, which worsens fiscal discipline for the rest. Tighter fis
 cal policy by this subset of countries ultimately results in tighter centra
 lized rules and lower flexibility for everyone.\n\n\n\n
DTSTAMP:20260404T064048Z
DTSTART:20150604T130000Z
DTEND:20150604T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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