Numerical fiscal rules in practice
Despite four year of unprecedented fiscal consolidation efforts, Greece does not yet have (national) numerical fiscal rules, which could help contain primary expenditure and anchor expectations about public finances in Greece. This paper examines practical aspects associated with the implementation of such rules. Issues including what categories of expenditure should be subject to the rule, how inflation is dealt with, how expenditure categories which fluctuate significantly across the cycle are treated and the extent to which the rule should apply to future years are all examined. Additionally, there is a discussion of how revenue projections and the targeted fiscal balance are used to determine the expenditure ceiling. Finally, the paper analyses how “indirect rules”, such as the “debt brake”, can operate as effective expenditure rules.
References listed on IDEAS
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- Drehmann, Mathias & Sorensen, Steffen & Stringa, Marco, 2010. "The integrated impact of credit and interest rate risk on banks: A dynamic framework and stress testing application," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 713-729, April.
- Jokivuolle, Esa & Kilponen, Juha & Kuusi, Tero, 2007. "GDP at risk in a DSGE model : an application to banking sector stress testing," Research Discussion Papers 26/2007, Bank of Finland.
- Antonella Foglia, 2009. "Stress Testing Credit Risk: A Survey of Authorities' Aproaches," International Journal of Central Banking, International Journal of Central Banking, vol. 5(3), pages 9-45, September.
- George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
- Jarrow, Robert A. & Turnbull, Stuart M., 2000. "The intersection of market and credit risk," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 271-299, January.
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