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 ?
State-owned enterprises have not faced hard budget constraints and China's industrial policy has become more and more problematic for foreign firms.
He said most economies have two mechanisms that force GDP data to conform to underlying economic performance - (1) Hard budget constraints which set spending limits, drive companies that systematically waste investment out of business before they can substantially distort the economy, and (2) A market-pricing factor in GDP accounting that when bad debts caused by wasted investment are written down, the value-added component of GDP and the overall level of reported growth is reduced.
Putin has allowed the "systemic liberals" in his administration to impose hard budget constraints even on the large state companies.
That would put an end to some pipe dreams, but it would also mean taking a step toward strengthening accountability and put the eurozone back on the path to hard budget constraints, without which no economic system can survive.
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.
16) holds, and hard budget constraints arise when it does not.
Hard budget constraints could, however, require reform, at least to prevent leakage and attain better income and geographic targeting.
The stable Bulgarian lev and the Currency Board is an institution that puts hard budget constraints.
Given hard budget constraints in FY13 and 1W 14, CVN-79 and CVN-80 cannot benefit from a multiyear construct," the Navy's response reads.
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.
Thus, the federal government is faced with a trade-off between the benefits of risk-sharing and the benefits of hard budget constraints.
16) This difference shows that the decision makers in CD are not under hard budget constraints.