Sunday, May 30, 2010

Addendum to previous week's Hurriyet column on the fiscal rule

When posting my Hurriyet column on the fiscal rule into the blog, I mentioned that the most original piece on the fiscal rule among the hundreds that appeared in the papers and research reports was the one by Yapi Kredi Research.

I specifically asked them to put that piece on their web site, and they kindly agreed; you can reach it here. I do not want to give out too many spoilers, and the piece is only two pages long, but they simply come out with time-varying alternative coefficients in the fiscal rule formula, which would ensure a faster convergence to the 1% deficit target (for the deficit part of the formula) as well as facilitate a higher savings rate (from the growth part of the formula). Having argued in my column that the 5% target is not enough for a country with a CSD problem like Turkey (read my column if you would like to know what CSD is), I was very happy to see their formulation...

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