Search results for "fiscal rules"
showing 4 items of 4 documents
A quest between fiscal and market discipline
2023
Fiscal rules are typically seen as government constraints. Yet, the extent to which they are substituted or complemented by market discipline (especially, during financial stress) remains unexplored. Using data for 71 countries over the period 1985–2015, we estimate an “augmented” fiscal reaction function to assess the impact of both fiscal and market discipline. We find that different market signals influence fiscal policy, but fiscal discipline depends on market incentives. In the EU and the OECD, market signals complement fiscal rules. These are less effective in the EMU and non-OECD countries that are “debt intolerant”. Yet, there are unintended consequences: (i) neither output and debt…
Fiscal Rules and Macroeconomic Stability
2005
In this paper we analyze the impact of fiscal rules on the effectiveness of fiscal policy as a macroeconomic stabilizing instrument. First, we review the available evidence on the effects of fiscal policy to affect output in the short run and real interest rates and investment and growth in the long run, and we show how the use of fiscal rules has proved useful in restraining debt and deficits. Secondly, we discuss if debt consolidation rules trade off higher output instability in exchange for lower deficits, using three alternative representations of the intertemporal substitution mechanism in a SDGE framework. Our main conclusion is that both the impact of discretionary fiscal policy and …
Automatic stabilizers, fiscal rules and macroeconomic stability
2006
This paper analyzes the effect of the fiscal structure upon the trade-off between inflation and output stabilization in the presence of technological shocks in a DGE model with nominal and real rigidities. The model reproduces the main features of European economies and it integrates a rich menu of fiscal variables as well as a target on the debt to output ratio. The main result of this paper is that distortionary taxes tend to increase output volatility relative to lump-sum taxes unless substantial rigidities are present. We explore in detail the mechanisms that generate such a result, and the conditions under which the supply-side effects of distortionary taxes and the procyclical behavio…
The Fiscal Councils – Independent Fiscal Institutions for Ensuring Fiscal Discipline
2017
Ensuring the sustainability of public finances can only be achieved through substantial and relevant analysis and evaluation of the problems faced by the fiscal and budgetary fields. Thus, through independent tax institutions, based on opinions and recommendations issued, can be identified those decisions designed to ensure a responsible fiscal and budgetary policy. Without claiming an exhaustive approach, through this article we will identify basic principles of Fiscal Councils, the main features of the Fiscal Councils from the IMF member states and we will try to highlight the best practices. By identifying best practices, we will highlight the role of Fiscal Councils in the prudent manag…