A golden rule of public finance or a fixed deficit regime? : growth and welfare effects of budget rules

In this paper, we compare growth and welfare eÞects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public an endogenous growth model with productive public capital, utility enhancing public the long run growth rate compared to a balanced budget while the growth rate is increased by a golden rule. Welfare eÞects are ambiguous. Simulations indicate that economies populated by households who have a strong tendency to smooth consumption should adhere to a balanced budget rather than a golden rule or a fixed de.cit rule from a welfare point of view.