The hidden compliance zone of fiscal rules

Research output: Contribution to journalArticlepeer-review


This paper studies fiscal rule compliance under uncertainty and irreversibility. I show that a broad class of fiscal rule designs contain a state space in which the government optimally complies with the rule in place, a compliance zone. Outside the compliance zone, the government exerts control on the path committed by the rule. I also show that the size of the rule’s compliance zone depends on two elements: first, how the rule copes with the uncertainty regarding the macro variable that underlies it; and second, how the fiscal spending path committed by the rule accommodates the demand for public goods.

Original languageEnglish (US)
Pages (from-to)1661-1670
Number of pages10
JournalApplied Economics Letters
Issue number12
StatePublished - 2023

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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