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Toward a Robust Fiscal Framework for Iceland

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  • Anthony Annett
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    Abstract

    Expenditure in Iceland, especially related to the government wage bill, has tended to move in a procyclical manner, related to the fragmentation of political decision making. Iceland''s elevated macroeconomic volatility reinforces these tendencies, as large booms unleash greater fiscal pressures as well as procyclical revenue elasticities that magnify these underlying strains. To improve its fiscal framework, Iceland could look to the experience of countries like Belgium and the Netherlands. In particular, it could adopt binding nominal expenditure rules, independent forecasts, and use representative committees to lay out medium-term targets across different levels of government.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/235.

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    Length: 25
    Date of creation: 01 Oct 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/235

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    Related research

    Keywords: Government expenditures; fiscal policy; expenditure; total expenditure; fiscal rules; fiscal framework; expenditure ceilings; government spending; fiscal targets; fiscal balance; fiscal discipline; expenditure growth; government expenditure; public finances; fiscal contract; fiscal governance; fiscal policy formulation; fiscal institutions; primary current expenditure; capital expenditure; expenditures; public expenditure; expenditure ratios; expenditure ceiling; fiscal adjustment; fiscal performance; fiscal policy decisions; central government spending; fiscal pressures; cyclical fiscal policy; expenditure items; annual budget; expenditure proposals; government budget; tax base; fiscal variables; fiscal surpluses; fiscal reaction function; fiscal budget; budgetary rules; fiscal measures; expenditure ratio; expenditure envelope; fiscal stance; increase in government expenditure; budget process; public debt; expenditure categories; tax cuts; fiscal forecasts; fiscal expansions; budgetary institutions; fiscal reaction; fiscal stabilization; fiscal pressure; subnational fiscal targets; medium-term projections; aggregate expenditure;

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    References

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    1. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
    2. repec:fth:coluec:754 is not listed on IDEAS
    3. Philip R. Lane, 2002. "The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD," Trinity Economics Papers 20022, Trinity College Dublin, Department of Economics.
    4. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR & CES & MSH, vol. 18(37), pages 533-572, October.
    5. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
    6. Ernesto Talvi & Carlos A. Vegh, 2000. "Tax Base Variability and Procyclical Fiscal Policy," NBER Working Papers 7499, National Bureau of Economic Research, Inc.
    7. Ashoka Mody & Stefania Fabrizio, 2006. "Can Budget Institutions Counteract Political Indiscipline?," IMF Working Papers 06/123, International Monetary Fund.
    8. Lars Jonung & Martin Larch, 2004. "Improving fiscal policy in the EU: the case for independent forecasts," European Economy - Economic Papers 210, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    9. Anthony Annett, 2002. "Politics, Government Size, and Fiscal Adjustment in Industrial Countries," IMF Working Papers 02/162, International Monetary Fund.
    10. Fabrizio Balassone & Maura Francese, 2004. "Cyclical asymmetry in fiscal policy, debt accumulation and the Treaty of Maastricht," Temi di discussione (Economic working papers) 531, Bank of Italy, Economic Research and International Relations Area.
    11. Morris, Richard & Schuknecht, Ludger, 2007. "Structural balances and revenue windfalls: the role of asset prices revisited," Working Paper Series 0737, European Central Bank.
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