Committed to flexible fiscal rules

• 成果类型: Article
• 署名作者: Grosse-Steffen, Christoph; Pagenhardt, Laura; Rieth, Malte
• 署名单位: European Central Bank; Bank of France; Free University of Berlin; Martin Luther University Halle Wittenberg; Leibniz Association; DIW Berlin - Deutsches Institut fur Wirtschaftsforschung
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2025.103809
• 发表日期: 2025
• 关键词: Fiscal policy; fiscal rules; Escape clauses; natural disasters

摘要

We study the implications of fiscal rules for macroeconomic stabilization when countries are hit by adverse exogenous shocks. Exploiting the unpredictability of natural disasters, we document that economies with a fiscal rule absorb these shocks better than those without: the responses of GDP and private demand are significantly higher. This difference is coupled with more expansionary fiscal policy and hinges on fiscal space. We analyze the interaction of rule flexibility and rule tightness in a quantitative model of sovereign default that exerts strong market discipline on governments conditional on disaster shocks. The results show potential welfare gains and a countercyclical fiscal response to adverse disaster shocks in the presence of tight rules and escape clauses.