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Discussion of Roel Beetsma,

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Good survey of theoretical and empirical research on discretionary ... Explicit coordination only in extreme situations: Wars, disasters, deflation, ... 6 ... – PowerPoint PPT presentation

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Title: Discussion of Roel Beetsma,


1
  • Discussion of Roel Beetsma,
  • A survey of the effects of discretionary fiscal
    policy
  • Lars E.O. Svensson
  • Sveriges Riksbank
  • January 29, 2008

2
Summary
  • Good survey of theoretical and empirical research
    on discretionary fiscal policy
  • Many papers
  • G?, T? ? Y?, C?

3
Summary Problems
  • Size of effects?
  • Future costs of increased debt?
  • Lags in identification, decision, and
    implementation
  • Preliminary data, uncertainty Errors in
    identification
  • Small open economy Less effect

4
Summary Conclusions
  • Better to rely on automatic stabilizers
  • But effects of automatic stabilizers depends on
    source and persistence of shocks
  • Introduce link between public debt level and
    cyclically adjusted primary deficit

5
Include, more of?
  • Politics of discretionary fiscal policy
  • Timely, targeted, temporary (how likely?)
  • Not just discretionary policy in survey
  • Effects of automatic stabilizers
  • Effective/optimal stabilizers?
  • Independent fiscal-policy council (soft, hard)?
  • Monetary/fiscal policy coordination?

6
Monetary/fiscal policy coordination?
  • Modern monetary policy Mandate, independence,
    accountability
  • Transparency, medium-term orientation of both
    fiscal and monetary policy
  • Simplifies implicit coordination (Nash,
    Stackelberg, )
  • Explicit coordination only in extreme situations
    Wars, disasters, deflation,
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