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Fiscal Rules and Targets and Public Expenditure Management - Enthusiasm in the 1990s and its Aftermath

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  • Hideaki Tanaka

    (Australia Japan Research Centre)

Abstract

The 1990s saw an era of fiscal consolidation in industrialised countries, which struggled with fiscal deficits throughout the 1970s and 1980s. Reforms in public expenditure management, typically the introduction of fiscal rules and targets, together with favourable economic growth contributed to a significant improvement in fiscal positions. However, fiscal deficits have been increasing again since the turn of the 21st century in many OECD countries. Interestingly, some countries have been able to maintain fiscal discipline since the achievement of fiscal balance in the latter half of the 1990s. What has caused this difference? This paper derives important lessons for reform in public expenditure management from the experiences of major OECD countries, including Australia, France, Germany, Japan, the Netherlands, New Zealand, Sweden, the UK and the USA. Essentially, success in maintaining fiscal discipline lies in maintaining a firm political commitment, and strengthening expenditure management that underpins any such commitment, specifically a medium-term fiscal plan in line with fiscal rules and targets in a centralised and transparent manner. Public expenditure management reform is a cornerstone of the restructuring of public sector services, especially in welfare programs aimed at overcoming problems arising from an aging population.

Suggested Citation

  • Hideaki Tanaka, 2005. "Fiscal Rules and Targets and Public Expenditure Management - Enthusiasm in the 1990s and its Aftermath," Finance Working Papers 22705, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:financ:22705
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    References listed on IDEAS

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    More about this item

    Keywords

    fiscal deficit; public expenditure management; OECD; Australia; France; Germany; Japan; Netherlands; New Zealand; Sweden; UK; USA; welfare programs; aging population;

    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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