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What should fiscal councils do?

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  • Simon Wren-Lewis
  • Lars Calmfors

Abstract

Fiscal councils now exist in a number of countries. This paper first considers the extent of deficit bias, potential explanations for it, and how independent institutions could help reduce it. Are fiscal councils complements to or substitutes for fiscal rules, and why do none at present have any formal control over fiscal decisions? The paper then outlines the specific tasks that a fiscal council might undertake, and examines how these are combined in eleven fiscal councils. A more detailed examination is undertaken of the fiscal councils in Sweden and the UK. The paper draws some conclusions on the role of fiscal forecasting, ensuring independence, and the provision of policy advice.

Suggested Citation

  • Simon Wren-Lewis & Lars Calmfors, 2011. "What should fiscal councils do?," Economics Series Working Papers 537, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:537
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper537.pdf
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    References listed on IDEAS

    as
    1. Martin Uribe & Stephanie Schmitt-Grohe, 2001. "Optimal fiscal and monetary policy under sticky prices," Proceedings, Federal Reserve Bank of San Francisco.
    2. Schmitt-Grohe, Stephanie & Uribe, Martin, 2004. "Optimal fiscal and monetary policy under sticky prices," Journal of Economic Theory, Elsevier, pages 198-230.
    3. Leith, Campbell & Simon Wren-Lewis, 2002. "Compatibility Between Monetary and Fiscal Policy Under EMU," Royal Economic Society Annual Conference 2002 124, Royal Economic Society.
    4. Simon Wren-Lewis, 2010. "Macroeconomic policy in light of the credit crunch: the return of counter-cyclical fiscal policy?," Oxford Review of Economic Policy, Oxford University Press, vol. 26(1), pages 71-86, Spring.
    5. Leith, Campbell & Wren-Lewis, Simon, 2006. "Compatibility between monetary and fiscal policy under EMU," European Economic Review, Elsevier, vol. 50(6), pages 1529-1556, August.
    6. Simon Wren-Lewis, 2011. "Comparing the delegation of monetary and fiscal policy," Economics Series Working Papers 540, University of Oxford, Department of Economics.
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    More about this item

    Keywords

    Fiscal policy; Debt; Deficit bias; Fiscal council;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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