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How to Calibrate Fiscal Rules; A Primer

Author

Listed:
  • Luc Eyraud
  • Anja Baum
  • Andrew Hodge
  • Mariusz Jarmuzek
  • H. Elif Ture
  • Samba Mbaye
  • Young Kim

Abstract

This note provides guidance on how to calibrate fiscal rules, that is, how to determine the thresholds (ceiling, floor, or target) for specific fiscal aggregates constrained by rules. The note focuses, more specifically, on the calibration of the debt, balance, and expenditure rules. The note is divided into four sections. The first section discusses general principles used to calibrate rules. The second section reports international evidence on the numerical ceilings used in existing rules. The third and fourth sections provide guidance on the calibration of the debt ceiling and the operational rules (fiscal balance and expenditure rules). This is one of two guidance notes on the design of fiscal rules; the other one focuses on rule selection. The two exercises are linked: if a fiscal framework had to be built from scratch, rules would need to be selected and calibrated at the same time.

Suggested Citation

  • Luc Eyraud & Anja Baum & Andrew Hodge & Mariusz Jarmuzek & H. Elif Ture & Samba Mbaye & Young Kim, 2018. "How to Calibrate Fiscal Rules; A Primer," IMF Fiscal Affairs Department 2018/002, International Monetary Fund.
  • Handle: RePEc:imf:imfhtn:2018/002
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=45551
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    Citations

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    Cited by:

    1. Clemens Fuest & Klaus Gründler & Niklas Potrafke & Marcel Fratzscher & Alexander Kriwoluzky & Claus Michelsen & Michael Hüther & Peter Bofinger & Lars P. Feld & Wolf Heinrich Reuter, 2019. "Schuldenbremse — Investitionshemmnis oder Vorbild für Europa? [Debt Brake — Investment Barrier or Role Model for Europe?]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 99(5), pages 307-329, May.
    2. Debrun, Xavier & Jonung, Lars, 2019. "Under threat: Rules-based fiscal policy and how to preserve it," European Journal of Political Economy, Elsevier, vol. 57(C), pages 142-157.
    3. Serhan Cevik, 2019. "Back to the Future: Fiscal Rules for Regaining Sustainability," IMF Working Papers 19/242, International Monetary Fund.
    4. Banegas Rivero, Roger Alejandro & Vergara González, Reyna, 2019. "Evaluación de escenarios fiscales para Bolivia," Revista Latinoamericana de Desarrollo Economico, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana, issue 32, pages 132-168, November.

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