Does it cost to be virtuous?
Subtitle: the macroeconomic effects of fiscal constraints
By: Fabio Canova, Evi Pappa.
Contributors: Pappa, Evi.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 11065.; Working paper series (National Bureau of Economic Research) -- working paper no. 11065.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 33
Subjects: Business cycles -- Econometric models; Fiscal policy
Description: "We study whether and how fiscal restrictions alter the business cycle features of macrovariables for a sample of 48 US states. We also examine the "typical" transmission properties of fiscal disturbances and the implied fiscal rules of states with different fiscal restrictions. Fiscal constraints are characterized with a number of indicators. There are similarities in second moments of macrovariables and in the transmission properties of fiscal shocks across states with different fiscal constraints. The cyclical response of expenditure differs in size and sometimes in sign, but heterogeneity within groups makes point estimates statistically insignificant. Creative budget accounting is responsible for the pattern. Implications for the design of fiscal rules and the reform of the Stability and Growth Pact are discussed"--National Bureau of Economic Research web site.
Notes: "January 2005."

Includes bibliographical references (p. 32-33).

Also available in PDF from the NBER world wide web site (www.nber.org).