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The design of national fiscal frameworks and their budgetary impact

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  • Nerlich, Carolin
  • Reuter, Wolf Heinrich
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    Abstract

    This study analyses the link between fiscal frameworks and their budgetary impact. We look at different features of national numerical fiscal rules in combination with fiscal councils and medium-term budgeting frameworks. We construct our own time-varying dataset for national fiscal frameworks for the period 1990-2012 covering all 27 EU Member States and estimate a dynamic panel on aggregate and disaggregated fiscal policy variables. We find strong support that numerical fiscal rules help to improve the primary balance, and that the budgetary impact can be further strengthened when supported by independent fiscal councils and an effective medium-term budgeting framework. JEL Classification: E61, E62, H60

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    Bibliographic Info

    Paper provided by European Central Bank in its series Working Paper Series with number 1588.

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    Date of creation: Sep 2013
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    Handle: RePEc:ecb:ecbwps:20131588

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    Related research

    Keywords: fiscal council; fiscal framework; Fiscal Policy; fiscal rules; medium term budgeting framework;

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    1. George Kopits & Steven A. Symansky, 1998. "Fiscal Policy Rules," IMF Occasional Papers 162, International Monetary Fund.
    2. Nina Budina & Andrea Schaechter & Anke Weber & Tidiane Kinda, 2012. "Fiscal Rules in Response to the Crisis," IMF Working Papers 12/187, International Monetary Fund.
    3. Xavier Debrun & David Hauner & Manmohan S. Kumar, 2009. "Independent Fiscal Agencies," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 44-81, 02.
    4. Giovanni S.F. Bruno, 2004. "Approximating the Bias of the LSDV Estimator for Dynamic Unbalanced Panel Data Models," KITeS Working Papers 159, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2004.
    5. Signe Krogstrup & Sébastien Wälti, 2007. "Do fiscal rules cause budgetary outcomes?," Trinity Economics Papers tep0607, Trinity College Dublin, Department of Economics.
    6. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 533-572, October.
    7. Jakob de Haan & Richard Jong-A-Pin & Jochen O. Mierau, 2012. "Do Budgetary Institutions Mitigate the Common Pool Problem? New Empirical Evidence for the EU," KOF Working papers 12-303, KOF Swiss Economic Institute, ETH Zurich.
    8. Lars Calmfors & Simon Wren-Lewis, 2011. "What Should Fiscal Councils Do?," CESifo Working Paper Series 3382, CESifo Group Munich.
    9. Cândida Ferreira, 2009. "Fiscal Behaviour in the European Union: Rules, Fiscal Decentralization and Government Indebtedness," Working Papers Department of Economics 2009/23, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
    10. Besley, Timothy J. & Case, Anne, 2002. "Political Institutions and Policy Choices: Evidence from the United States," CEPR Discussion Papers 3498, C.E.P.R. Discussion Papers.
    11. F. Holm-Hadulla & S. Hauptmeier & P. Rother, 2012. "The impact of expenditure rules on budgetary discipline over the cycle," Applied Economics, Taylor & Francis Journals, vol. 44(25), pages 3287-3296, September.
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