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The authors find and compare two simple fiscal rules. The first is a theoretical rule that approximates well Ramsey-optimal fiscal policy in a DSGE model calibrated to the U.S. economy over the period 1955:1 to 2007:3; the second is an empirical rule that approximates well actual U.S. fiscal policy over the same period. Their main findings are: first, Ramsey-optimal fiscal policy displays limited volatility even in the presence of sticky prices, while public debt absorbs most of the shocks. Second, actual U.S. fiscal policy is excessively counter-cyclical.
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