We study the impact of expenditure rules on the propensity for governments to deviate from their expenditure plans in response to surprising cyclical developments. Theoretical considerations suggest that due to political fragmentation in the budgetary process expenditure policy might be prone to...

This article highlights the importance of debt-related fiscal rules and derives growth-maximizing public debt ratios from a simple theoretical model. On the basis of evidence on the productivity of public capital, we estimate public debt targets that governments should maintain if they wish to...