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Fiscal Discipline: Rules Rather than Institutions

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Author Info

  • Charles Wyplosz

    ()
    (The Graduate Institute, Geneva, and CEPR.)

Abstract

The lack of fiscal discipline is a natural and pervasive implication of the perceived separation between the benefits from public spending and the taxes that individuals and interest groups receive and pay, respectively. The implication is that budget preparation, decision and execution must be constrained. The challenge is that the policymakers who need to be constrained are those who must decide the constraints. Two broad classes of solutions are possible: institutions that shape the budgetary process and quantitative rules that set limits. The mounting experience with both institutions and rules is disappointing, for reasons that are often complementary. Examining the reasons for this state of affairs, this article argues that institutions and rules ought to be combined and associated with advisory fiscal councils.

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Bibliographic Info

Article provided by National Institute of Economic and Social Research in its journal National Institute Economic Review.

Volume (Year): 217 (2011)
Issue (Month): 1 (July)
Pages: R19-R30

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Handle: RePEc:sae:niesru:v:217:y:2011:i:1:p:r19-r30

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Related research

Keywords: Fiscal discipline; deficit bias; policy rules; fiscal institutions;

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Cited by:
  1. Suari Andreu, Eduard & Mierau, Jochen O., 2014. "Fiscal rules and government size in the European Union," Research Report 14009-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  2. Catherine Mathieu & Henri Sterdyniak, 2012. "Do we need fiscal rules?," Sciences Po publications 2012-08, Sciences Po.
  3. Henri Sterdyniak & Catherine Mathieu, 2012. "Faut-il des règles de politiques budgétaires ?," Sciences Po publications info:hdl:2441/eo6779thqgm, Sciences Po.
  4. André Grjebine, 2013. "L’Eurosystème: un mécanisme de transferts en faveur des pays déficitaires ? Le débat," Sciences Po publications info:hdl:2441/eo6779thqgm, Sciences Po.
  5. Henri Sterdyniak, 2012. "Ramener à zéro le déficit public doit-il être l’objectif central de la politique économique ?," Sciences Po publications info:hdl:2441/c6t1fl36hv9, Sciences Po.

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