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A Consideration of Fiscal Targetry

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  • Chadha, J. S.

Abstract

The UK's current fiscal rules and framework are not fit for purpose. Try as might the rules are more "honor'd in the breach than the observance". And have introduced an unintended incentive on the margin (at fiscal events) to trade off government investment for government consumption. They have led to a trivialisation of the fiscal policy debate centred on arbitrary fiscal space. And taken attention away from the failures of economic policy, which on an assessment by the OBR (Office for Budget Responsibility), have significantly damaged potential output, leading to a more inflation prone country and one that has developed a structural fiscal deficit. A further problem, articulated by Dow (1964) has been the increasing reliance on frequent but noisy economic forecasts and this has raised the spectre of a return to fiscal fine tuning by governments eager to establish fiscal credibility.

Suggested Citation

  • Chadha, J. S., 2026. "A Consideration of Fiscal Targetry," Cambridge Working Papers in Economics 2605, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2605
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    References listed on IDEAS

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    1. Chadha, Jagjit S. & Nolan, Charles, 2004. "Interest rate bounds and fiscal policy," Economics Letters, Elsevier, vol. 84(1), pages 9-15, July.
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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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