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The Role of Independent Fiscal Policy Institutions

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  • Lars Calmfors

Abstract

The paper analyses how independent fiscal watchdogs (fiscal policy councils) can strengthen the incentives for fiscal discipline. By increasing fiscal transparency they can raise the awareness of the long-run costs of current deficits and increase the reputational costs for governments of violating their fiscal rules. Councils that make also normative judgements, where fiscal policy is evaluated against the government’s own pre-set objectives, are likely to be more influential than councils that do only positive analysis. To fulfil their role adequately, fiscal watchdogs should be granted independence in much the same way as central banks.

Suggested Citation

  • Lars Calmfors, 2011. "The Role of Independent Fiscal Policy Institutions," CESifo Working Paper Series 3367, CESifo.
    • Handle: RePEc:ces:ceswps:_3367
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp3367.pdf
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    References listed on IDEAS

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    1. von Hagen, Jurgen & Wolff, Guntram B., 2006. "What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3259-3279, December.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "From Financial Crash to Debt Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 1676-1706, August.
    3. 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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    Citations

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    Cited by:

    1. Comăniciu Carmen, 2017. "The Fiscal Councils – Independent Fiscal Institutions for Ensuring Fiscal Discipline," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 531-536, December.
    2. Ryta Dziemianowicz, 2014. "Independent Fiscal Institutions As A Tool Of Fiscal Governance," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 9(1), pages 59-70, March.
    3. Henrique S. Basso & James Costain, 2017. "Fiscal delegation in a monetary union: instrument assignment and stabilization properties," Working Papers 1710, Banco de España.
    4. Jafri, Juvaria, 2014. "Should we be Austere? A Normative look at Public Debt," MPRA Paper 63337, University Library of Munich, Germany.
    5. Mihaela Onofrei & Tudorel Toader & Anca Florentina Vatamanu & Florin Oprea, 2021. "Impact of Governments’ Fiscal Behaviors on Public Finance Sustainability: A Comparative Study," Sustainability, MDPI, vol. 13(7), pages 1-16, March.
    6. Randall S. Jones & Kohei Fukawa, 2015. "Achieving Fiscal Consolidation while Promoting Social Cohesion in Japan," OECD Economics Department Working Papers 1262, OECD Publishing.
    7. Mark Schelker, 2016. "Unabhängige Finanzkontrolle in der Demokratie," CREMA Working Paper Series 2016-06, Center for Research in Economics, Management and the Arts (CREMA).
    8. Martin Gorčák & Stanislav Šaroch, 2022. "Fiscal Councils In Eu Member States: Impact On Fiscal Discipline," Prague Economic Papers, Prague University of Economics and Business, vol. 2022(5), pages 327-346.
    9. Lars Calmfors, 2012. "The Swedish Fiscal Policy Council: Watchdog with a Broad Remit," CESifo Working Paper Series 3725, CESifo.
    10. Domokos, László, 2011. "Credibility and Flexibility – Changes in the Framework of Hungarian Public Finances," Public Finance Quarterly, Corvinus University of Budapest, vol. 56(3), pages 291-302.

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    More about this item

    Keywords

    fiscal institutions; deficit bias; fiscal transparency;
    All these keywords.

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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