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Making Fiscal Commitments Credible

Author

Listed:
  • Michal Horvath

    (Nuffield College, University of Oxford)

  • Ludivit Odor

    (The National Bank of Slovakia)

Abstract

The study critically analyzes the weak points of current fiscal institutions in Slovakia, while proposing a new institutional framework. It is based on the concept of the net worth and reflects international experience. The main part of the proposal is additional fiscal rules to the Stability and Growth Pact – a gross debt limit and expenditure ceilings, new rules for the financial management of municipalities, and requirements for greater transparency. It is our proposal to set up a Fiscal Council under the National Council of the Slovak Republic, which would check and monitor fiscal processes and rules. The new framework should increase the credibility of Slovakia when looking for exit strategies following unfavourable impacts of the current economic crisis; it should also lead to lower interest rates and more dynamic and stable growth from the long-term perspective.

Suggested Citation

  • Michal Horvath & Ludivit Odor, 2009. "Making Fiscal Commitments Credible," Working and Discussion Papers DP 2/2009, Research Department, National Bank of Slovakia.
    • Handle: RePEc:svk:wpaper:1006
    as

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    File URL: http://www.nbs.sk/_img/Documents/PUBLIK/DP_2_2009_Horvath_Odor.pdf
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    References listed on IDEAS

    as
    1. Andrei Shleifer, 2003. "Will the Sovereign Debt Market Survive?," American Economic Review, American Economic Association, vol. 93(2), pages 85-90, May.
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    Cited by:

    1. Caroline Klein & Robert Price & Andreas Wörgötter, 2013. "Improving the Fiscal Framework to Enhance Growth in an Era of Fiscal Consolidation in Slovakia," OECD Economics Department Working Papers 1018, OECD Publishing.
    2. Ludovit Odor, 2014. "Fiscal Risk Assessment at the CBR: A Conceptual Framework," Discussion Papers Discussion Paper No. 1/20, Council for Budget Responsibility.

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    More about this item

    Keywords

    Fiscal rules; Fiscal Council; Time inconsistence; Net worth;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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