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How Can Fiscal Councils Strengthen Fiscal Performance?

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  • Robert Hagemann
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    Abstract

    There is growing interest in the role of independent fiscal institutions, or fiscal councils, in helping to improve fiscal performance. This article provides some guidance on the scope for improving fiscal performance through fiscal councils based on the available literature and the range of fiscal institutions in the OECD countries. The effectiveness of fiscal councils hinges on several factors, including having full autonomy within the scope of their mandates, active and unfettered dissemination of their analysis, and their credibility. Experience and empirical evidence suggest that delegating macroeconomic forecasting to an independent fiscal council can indeed reduce forecasting bias. There is some empirical evidence that independent fiscal institutions can buttress a government’s capacity to comply with a numerical rule. Good fiscal institutions are a necessary condition for achieving disciplined fiscal performance. Experience demonstrates, however, that their existence is not sufficient. Without strong and sustained political commitment to a medium-term fiscal goal and, where relevant, to the mandate of a fiscal council, durable improvements in fiscal performance will remain elusive.

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    File URL: http://dx.doi.org/10.1787/eco_studies-2011-5kg2d3gx4d5c
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    Bibliographic Info

    Article provided by OECD Publishing in its journal OECD Journal: Economic Studies.

    Volume (Year): 2011 (2011)
    Issue (Month): 1 ()
    Pages: 1-24

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    Handle: RePEc:oec:ecokac:5kg2d3gx4d5c

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    Related research

    Keywords: Fiscal policy; fiscal councils; fiscal frameworks;

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    Cited by:
    1. Xavier Debrun & Tidiane Kinda, 2014. "Strengthening Post-Crisis Fiscal Credibility: Fiscal Councils on the Rise — A New Dataset," IMF Working Papers 14/58, International Monetary Fund.
    2. Estian Calitz & Krige Siebrits & Ian Stuart, 2013. "Enhancing the credibility of fiscal forecasts in South Africa: Is a fiscal council the only way?," Working Papers 25/2013, Stellenbosch University, Department of Economics.

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