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"A Fiscal Policy Rule for Stabilization," February 1999, unpublished.
pdf file (119KB).


A tax rate rule for stabilization purposes is proposed in this paper. Stochastic simulation results suggest that this rule would be a considerable help to monetary policy in its stabilization effort.

The timing of this paper is poor, since at the moment (February 1999) there seems little need for U.S. monetary policy to be helped. However, if in the future there are some bad shocks, a tax rate rule of the kind examined in this paper may be of help.

The multiplier results in this paper can be duplicated on this site. Chapter 2 of The MC2 Model Workbook explains how to do this--Chapter 2, MC2 Workbook.

The tax rate rule is used for some of the results in .