A working paper, published by the International Monetary Fund in July, examines the effect of the financial crisis on US state finances, where balanced budget rules led some states to cut spending and raise taxes in response to the recession.

The author, Jiri Jonas, argues that balanced budget rules had both positive and negative effects during the crisis. The rules prevented states from accumulating large debts that would have posed a problem to stability, but were pro-cyclical, which, the