IDEAS home Printed from https://ideas.repec.org/a/cpn/umkeip/v15y2016i1p59-71.html
   My bibliography  Save this article

Are fiscal rules an effective instrument in consolidating public finances? Conclusions from the economic crisis

Author

Listed:
  • Joanna Dzialo

    (University of Lodz)

Abstract

The paper aims to assess the role of fiscal rules in the process of consolidating public finances and maintaining macroeconomic stability in the EU Member States in the period of the economic crisis. The paper puts forward the thesis that fiscal rules were not an effective instrument for ensuring fiscal discipline in times of crisis. It will present the most important issues of the process of evolution of the rules during the crisis. A review and an analysis of legislation and literature on reforms implemented in the area of fiscal rules, confirms this thesis. The paper points to the need to create such fiscal rules that could contribute not only to fiscal stability but also to macroeconomic stability of the economy and concludes with recommendations for the creation of effective fiscal rules and their desirable features. The rules should be based on the structural balance or the over the cycle balance (but, in order for such rules to be effective, the structural deficit should be relatively low). Effective enforcement of the rules is necessary as well as a strong legal basis for the rules. However, one may remember that the efficiency of the rules is also determined by causes and the scope of fiscal problems in individual countries. The rules alone are not sufficient to overcome the strong systemic and structural burdens placed on economies. In such a situation, a better solution is to develop a long-term strategy for reducing deficit and debt levels, incorporating fiscal rules as one of its elements.

Suggested Citation

  • Joanna Dzialo, 2016. "Are fiscal rules an effective instrument in consolidating public finances? Conclusions from the economic crisis," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 15(1), pages 59-71, March.
  • Handle: RePEc:cpn:umkeip:v:15:y:2016:i:1:p:59-71
    DOI: 10.12775/EiP.2016.005
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.12775/EiP.2016.005
    Download Restriction: no

    File URL: https://libkey.io/10.12775/EiP.2016.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Charles Wyplosz, 2012. "Fiscal Rules: Theoretical Issues and Historical Experiences," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 495-525, National Bureau of Economic Research, Inc.
    2. Allen Schick, 2010. "Post-Crisis Fiscal Rules: Stabilising Public Finance while Responding to Economic Aftershocks," OECD Journal on Budgeting, OECD Publishing, vol. 10(2), pages 1-18.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Catherine Mathieu & Henri Sterdyniak, 2012. "Faut-il des règles de politique budgétaire ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(7), pages 299-346.
    2. repec:hal:wpspec:info:hdl:2441/eo6779thqgm5r489maqa474kg is not listed on IDEAS
    3. Kéa Baret & Amélie Barbier-Gauchard & Théophilos Papadimitriou, 2021. "Forecasting the Stability and Growth Pact compliance using Machine Learning," Working Papers of BETA 2021-01, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. repec:hal:wpspec:info:hdl:2441/eo6779thqgm5r489m6u1i2a0o is not listed on IDEAS
    5. repec:spo:wpecon:info:hdl:2441/eo6779thqgm5r489maqa474kg is not listed on IDEAS
    6. repec:spo:wpmain:info:hdl:2441/eo6779thqgm5r489maqa474kg is not listed on IDEAS
    7. repec:spo:wpmain:info:hdl:2441/eo6779thqgm5r489m6u1i2a0o is not listed on IDEAS
    8. Dulleck, Uwe & Wigger, Berthold U., 2015. "Politicians as experts, electoral control, and fiscal restraints," Journal of Public Economics, Elsevier, vol. 121(C), pages 106-116.
    9. repec:spo:wpecon:info:hdl:2441/eo6779thqgm5r489m6u1i2a0o is not listed on IDEAS
    10. repec:hal:spmain:info:hdl:2441/eo6779thqgm5r489maqa474kg is not listed on IDEAS
    11. repec:hal:spmain:info:hdl:2441/eo6779thqgm5r489m6u1i2a0o is not listed on IDEAS
    12. Hans Pitlik & Michael Klien & Stefan Schiman, 2017. "Stabilitätskonforme Berücksichtigung nachhaltiger öffentlicher Investitionen," WIFO Studies, WIFO, number 60595.
    13. Maltritz, Dominik & Wüste, Sebastian, 2015. "Determinants of budget deficits in Europe: The role and relations of fiscal rules, fiscal councils, creative accounting and the Euro," Economic Modelling, Elsevier, vol. 48(C), pages 222-236.
    14. Cyrus MUTUKU, 2015. "Assessing Fiscal Policy Cyclicality and Sustainability: A Fiscal Reaction Function for Kenya," Journal of Economics Library, KSP Journals, vol. 2(3), pages 173-191, September.
    15. Jonathan Portes & Simon Wren-Lewis, 2015. "Issues in the Design of Fiscal Policy Rules," Manchester School, University of Manchester, vol. 83, pages 56-86, September.
    16. Rybacki, Jakub, 2021. "Does International Monetary Fund Favor Certain Countries During the Fiscal Forecasting – Evidence of the Institutional Biases?," MPRA Paper 107681, University Library of Munich, Germany.
    17. Reuter, Wolf Heinrich, 2019. "When and why do countries break their national fiscal rules?," European Journal of Political Economy, Elsevier, vol. 57(C), pages 125-141.
    18. Covalschi Tatiana & Lazăr Sebastian, 2016. "The Sustainability of Public Finances in Republic of Moldova Under EU Fiscal Rules," Scientific Annals of Economics and Business, Sciendo, vol. 63(2), pages 149-159, June.
    19. repec:cnb:ocpubv:as16 is not listed on IDEAS
    20. Jonathan Portes & Simon Wren-Lewis, 2015. "Issues in the Design of Fiscal Policy Rules," Manchester School, University of Manchester, vol. 83, pages 56-86, September.
    21. Ovalle, Raul & Ramírez, Francisco A., 2014. "Reglas versus Discreción en la Política Fiscal: Introducción al caso Dominicano [Rules vs Discretion in Fiscal Policy: An Introduction to the Case of the Dominican Republic]," MPRA Paper 68332, University Library of Munich, Germany.
    22. G. W. Kolodko & M. Postula., 2018. "Determinants and implications of the Eurozone enlargement," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
    23. Postuła Marta & Klepacki Jarosław & Alińska Agnieszka, 2018. "The Impact of Standardised fiscal rules index on the Yield on Ten-Year Government Bonds in the Visegrád Group Countries in 2005–2016," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 26(3), pages 49-70, September.
    24. Catherine Mathieu & Henri Sterdyniak, 2013. "Do we need fiscal rules?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 189-233.
    25. López-Herrera, Carmen & Cordero, José M. & Pedraja-Chaparro, Francisco & Polo, Cristina, 2023. "Fiscal rules and their influence on public sector efficiency," MPRA Paper 119018, University Library of Munich, Germany.
    26. Ugo Troiano, 2017. "Intergovernmental Cooperation and Tax Enforcement," NBER Working Papers 24153, National Bureau of Economic Research, Inc.
    27. Aida Caldera Sánchez & Morten Rasmussen & Oliver Röhn, 2016. "Economic Resilience: What Role for Policies?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 1-44, June.
    28. Gregorz W. Kolodko & Marta Postula, 2018. "Determinants and Implications of the Eurozone Enlargement," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 68(4), pages 477-498, December.
    29. repec:hal:spmain:info:hdl:2441/eul7jlnf19iq8tdp0vlfv63n5 is not listed on IDEAS
    30. Daniel Vaughan-Whitehead, 2013. "Public sector shock in Europe: Between structural reforms and quantitative adjustment," Chapters, in: Daniel Vaughan-Whitehead (ed.), Public Sector Shock, chapter 1, pages 1-42, Edward Elgar Publishing.

    More about this item

    Keywords

    effective fiscal rules; public finances; economic crisis; structural deficit; over the cycle deficit;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpn:umkeip:v:15:y:2016:i:1:p:59-71. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Miroslawa Buczynska (email available below). General contact details of provider: http://www.wydawnictwoumk.pl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.