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Why don't we follow the rules? Drivers of compliance with fiscal policy rules in emerging markets

Author

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  • Ardanaz, Martín
  • Ulloa-Suárez, Carolina
  • Valencia, Oscar

Abstract

Under what conditions do countries comply with their fiscal policy rules? We tackle this question in the context of emerging countries, with a specific focus on Latin America and the Caribbean, a region where fiscal rules have become increasingly common in recent decades. Based on an original dataset of compliance behavior across 14 countries observed between 2000 and 2020, we first document that complying with fiscal rules makes a difference in terms of fiscal performance. We then show that compliance is affected by rule-specific features and the broader macroeconomic and politico-institutional environment. Our findings contribute to the literature by showing the relevant design features and pre-conditions that may foster or inhibit the successful implementation of rules-based fiscal frameworks in emerging markets.

Suggested Citation

  • Ardanaz, Martín & Ulloa-Suárez, Carolina & Valencia, Oscar, 2024. "Why don't we follow the rules? Drivers of compliance with fiscal policy rules in emerging markets," Journal of International Money and Finance, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:jimfin:v:142:y:2024:i:c:s0261560624000330
    DOI: 10.1016/j.jimonfin.2024.103046
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    More about this item

    Keywords

    Fiscal rules; Fiscal policy; Compliance;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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