We present a computational approach to the design of fiscal policy that is based on algorithmic, linear feedback control methods. In particular, in the context of a linear, deterministic macro-model, we develop an algorithmic procedure which allows us to design fiscal policy rules for government expenditures so that desired target-levels for GDP are exactly met (that is, complete tracking is achieved). In order to examine the effectiveness of our method we estimate the model for the Greek economy and run some counterfactual policy experiments. These experiments indicate that, for the Greek economy in the beginning of the crisis in early 2010, expansionary fiscal policy would have been able to stimulate growth and reduce the debt-to-GDP ratio.
ESRI Series Number: 201825 Research Area:Macroeconomics Date of Publication: April 12, 2018 Published Online: January 25, 2018 Publisher: Springer View External Link
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