Budget regimes and internal governance: considerations for the sustainability of fiscal policy |
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Authors: | Wm Stewart Mounts Jr Clifford B Sowell |
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Institution: | (1) Mercer University, Stetson School of Business and Economics, GA 31207 Macon, USA;(2) Department of Economics, Berea College, KY 40404 Berea, USA |
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Abstract: | In a fiscal policy set-up with Ricardian equivalence and rational expectations, the decision-making of private agents is based
on the knowledge that current deficits will be met with future tax increases or spending decreases. This view requires that
the government's budget exhibit intertemporal balance, or that fiscal policy be sustainable. This paper examines the extent
to which sustainability holds in the light of changes in the institutional structure of the budget process and changes in
internal House governance rules. The results indicate that certain aspects of sustainability are related to the underlying
institutional structure and governance of the budget process.
The authors wish to thank the editors and three anonymous referees for their thoughtful comments and suggestions. All remaining
errors remain our own. |
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Keywords: | Budget regimes rational expectations sustainability |
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