In this paper we examine the implication of a simple class of fiscal rules for long-run economic growth and welfare. The Golden Rule of Public Finance that we examine is motivated by institutional arrangements in countries such as Germany and the UK. We find that rules that seek to limit...

This study is based on a two-country endogenous growth model with optimizing agents, where public investment affects the real exchange rate and the long-run growth rate, and does so in a non-linear fashion. Non-parametric regression analysis of quarterly data from the UK and the USA suggests...