Fiscal Rules in Response to the Crisis: Toward the "Next-Generation" Rules: A New Dataset

Abstract

Strengthening fiscal frameworks, in particular fiscal rules, has emerged as a key response to the fiscal legacy of the crisis. This paper takes stock of fiscal rules in use around the world, compiles a dataset-covering national and supranational fiscal rules, in 81 countries from 1985 to end-March 2012-and presents details about the rules' key design elements, particularly in support of enforcement. This information is summarized in a set of fiscal rules indices. Three key findings emerge: (i) many new fiscal rules have been adopted and existing ones strengthened in response to the crisis; (ii) the number of fiscal rules and the comprehensiveness of the design features in emerging economies has caught up to those in advanced economies; and (iii) the "next-generation" fiscal rules are increasingly complex as they combine the objectives of sustainability and with the need for flexibility in response to shocks, thereby creating new challenges for implementation, communication, and monitoring.

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“…Важно подчеркнуть, что для целей настоящей статьи «бюджет-ные правила» авторы понимают в узком смысле, подразумевая под ними набор количественных ограничений на отдельные бюджетные агрегаты: доходы, расходы, баланс (дефицит или профицит) и долг [Budina, 2012], в то время как в практике финансового менеджмента существует и более широкая их трактовка, при которой количествен-ные ограничения дополняются процедурами бюджетного процесса [Alesina, Perotti, 1999]. Более того, исходя из международной прак-тики бюджетные правила могут устанавливаться либо федеральным центром, либо непосредственно регионами.…”

Optimal Design of New Generation Fiscal Rules: Coping with the Business Cycle and Discretionary Tax Reductions

“…Finally, note that three kinds of rules are generally used by policy-makers to deal with the political bias and with tax reductions [1]: i) budget deficit rules that constrain the deficit (effective mainly in recessions); ii) expenditure rules that constraint the increase in expenditure both in expansions and in recessions; iii) revenue rules, aimed at preventing unbalanced tax reductions.…”

“…The use of this last type of rule is less common, but it has been increasing in recent years. Kumar [34] and Budina [1] stress that the complexity of fiscal finances in modern times imply that the coexistence of the different types of rules is desirable.…”

“…Following the recent global economic crisis and the resulting high budget deficits, countries are adopting and strengthening fiscal rules [1]. The main motive for that policy change is to provide credibility to the fiscal consolidation policy in order to improve the likelihood of transition to lower fiscal deficits.…”

“…Reducing tax rates can be used by politicians as a tool for gaining popularity, while at the same time the budget balance may be threatened 1 . One of the reasons for the lack of research on this field was the inexistence of data on statutory tax rates.…”