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 ?
According to influential MMT advocates such as Stephanie Kelton, governments in countries with their own national currency, such as the US, do not face hard budget constraints because they can simply print more money to finance higher expenditures.
It describes the pros and cons of fiscal decentralization; best practices for the main design elements of fiscal decentralization, including clarifying spending responsibilities across levels of government, allowing subnational governments to raise own-source revenues to reduce vertical imbalances and increase fiscal responsibility, designing a transfer system that encourages subnational governments to collect own revenue and manage their functions effectively, and imposing hard budget constraints on subnational governments to foster fiscal discipline; the status of fiscal decentralization in the region; and the experience in Kenya, Nigeria, South Africa, and Uganda.
"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.
But those reforms have done more to liberalize economic activity, creating markets and freedom to compete, than to impose disciplines and hard budget constraints on borrowers.
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.
(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.
They backed the "hard budget constraints" proposed by the Tories, Lib Dems and the Greens for an "extended period of non-adjustment" in the block grant of between 12 and 15 years.
"The stable Bulgarian lev and the Currency Board is an institution that puts hard budget constraints. This means that the Bulgarian National Bank can not use the printing press to finance everyone.