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Good, Bad or Ugly?on the Effects of Fiscal Rules with Creative Accounting

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  • Gian-Maria Milesi-Ferretti

Abstract

Do fiscal rules likely lead to fiscal adjustment, or do they encourage the use of ‘creative accounting’? This question is studied with a model in which fiscal rules are imposed on ‘measured’ fiscal variables, which can differ from ‘true’ variables because there is a margin for creative accounting. The probability of detecting creative accounting depends on its size and the transparency of the budget. The model studies the effects on fiscal policy of different rules, separating structural from cyclical effects, and examines how these effects depend on the underlying fiscal distortion and on the degree of transparency of the budget.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/172.

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Length: 26
Date of creation: 01 Oct 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/172

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Keywords: Budgetary policy; Government accounting; fiscal policy; budget rule; budget deficit; fiscal rules; fiscal rule; budget surplus; budget constraint; budget deficits; fiscal adjustment; budget rules; taxation; government spending; budget transparency; fiscal performance; tax rates; transparent budgets; fiscal deficits; fiscal discipline; fiscal profligacy; fiscal restraints; tax revenue; public investment; discretionary fiscal policy; budget balance; fiscal constraints; public expenditure; structural fiscal; fiscal balance; excessive deficits; fiscal deficit; public debt; government revenue; public spending; budget position; level of public spending; fiscal imbalances; budgetary institutions; fiscal aggregates; fiscal policy decisions; fiscal stance; fiscal position; fiscal authority; national budget; government solvency; budgetary outcomes; cyclical downturns; budgetary position; fiscal authorities; fiscal targets; fiscal stabilizers; fiscal policy rules; government budget; budgetary accounts; public deficits; fiscal crises; budget institutions; fiscal behavior; formal fiscal restraints; fiscal outcome; state budgets; fiscal variables; composition of public spending; fiscal policy variables; cyclical fiscal policy; expenditure policy; accounting practices; cyclical downturn; cyclical ? fiscal policy; government liabilities;

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