Fed paper assesses German ‘debt brake’

federal reserve

A working paper published by the Federal Reserve, on November 19, considers the macroeconomic implications of Germany's "debt brake": a rule attempting to lower the government deficit.

The author, Tobias Cwik, uses a New Keynesian dynamic stochastic general equilibrium model to assess its impact, and finds the rule enforces fiscal consolidation when the economy is expanding without constraining fiscal policy-makers in times of recessions.

By helping consolidate government spending and transfers

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