Advanced Search
MyIDEAS: Login to save this article or follow this journal

Act one, act first – the law on fiscal responsibility

Contents:

Author Info

  • Gergely Baksay

    ()
    (Magyar Nemzeti Bank (central bank of Hungary))

  • Gábor P. Kiss

    ()
    (Magyar Nemzeti Bank (central bank of Hungary))

Abstract

The Law on Fiscal Responsibility adopted late 2008 is a new element in Hungarian fiscal policy, although not without precedent. Under the law, the Parliament and the Government limit themselves to prevent high fiscal deficits and a further increase in public indebtedness, experienced in recent years. Budget planning turns into a three-year process, hardening over time. As a first step, the targeted primary (non-interest) budget balance is subject to the requirement that the stock of government debt cannot rise in real terms. However, ex post, the law allows for deviations in fiscal performance-including those reflecting the effect of so-called automatic stabilizers-attributable to factors beyond the control of the authorities. This means that the actual deficit is not necessarily equal to the deficit path consistent with the real debt limit, but it may fluctuate around this trend over the medium term. In addition, the law prescribes observance of the pay-go principle. Finally, it provides for the establishment of an independent Fiscal Council entrusted with monitoring compliance with the rules and with transparency standards. We evaluated the law according to the Kopits–Symansky criteria applied in the international literature. In most aspects, the law exhibits favourable properties, consistent with the criteria, although inevitably at the expense of simplicity. The assessment suggests that the law would benefit from extending coverage of the rules to local governments. Moreover, enforceability of the rules would be strengthened if the law were adopted by a qualified legislative majority.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbszemle/mnben_szemle_cikkei/baksay-kiss_en.pdf
Download Restriction: no

Bibliographic Info

Article provided by Magyar Nemzeti Bank (the central bank of Hungary) in its journal MNB Bulletin.

Volume (Year): 4 (2009)
Issue (Month): 1 (May)
Pages: 15-23

as in new window
Handle: RePEc:mnb:bullet:v:4:y:2009:i:1:p:15-23

Contact details of provider:
Web page: http://www.mnb.hu/
More information through EDIRC

Related research

Keywords: fiscal rules; budget planning; Fiscal Council.;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mnb:bullet:v:4:y:2009:i:1:p:15-23. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.