Hard Budget Constraint

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Hard Budget Constraint

A spending limit that cannot be exceeded without drastic consequences. For example, a country cannot exceed its debt ceiling without incurring panic in its bond markets. More commonly, however, this term refers to the requirement that a money manager or investment company at least break even and preferably meet some target profit for clients or shareholders. Companies that fail to meet hard budget constraints may see shake-ups in their management, perhaps with major executives losing their jobs.
References in periodicals archive ?
As hard budget constraints limit the scope for the Kyrgyz Government to increase social transfers, the uncertainties surrounding the economic fortunes of countries hosting Kyrgyz labor migrants put at risk these countries continued ability to absorb the migrants.
Hard budget constraints could, however, require reform, at least to prevent leakage and attain better income and geographic targeting.
But, as the private sector develops, SOEs are subjected to hard budget constraints, and the external capital account is opened, this huge credit mountain will create increasing global financial vulnerability.
The stable Bulgarian lev and the Currency Board is an institution that puts hard budget constraints.
Fortunately, capital markets finally stepped in to impose necessary hard budget constraints on governments.
To the extent that companies in Western countries face hard budget constraints as a system-specific feature of any developed economy (Kornai, 2000), overinvestment will be constrained by levels of internal cash flows.
The firm faces a hard budget constraint as long as it does not receive support from other organisations to cover its deficit.
16) This difference shows that the decision makers in CD are not under hard budget constraints.
This evidence illustrates that the Czech railway industry spends more than it would be able to spend if it were under hard budget constraints.
First, gain control of the overall macroeconomic situation very quickly in order to reduce the rate of domestic inflation and the reserve loss via the current account deficits and Second, introduce efficiency enhancing reforms that will make resource allocation and consumption decisions subject to market forces and all economic agents including the government subject to hard budget constraints.
There is little mention of the extent of government regulation or of large firms with large bureaucracies and not quite hard budget constraints in most capitalist economies.
If there is a positive link between credit and investment and if external financing is more costly than internal financing, Polish industries have operated under hard budget constraints.