Rules, and Their Effects on Fiscal Policy

Fiscal rules aim at constraining public debt. In Sweden, a combination of procedural and numerical rules was introduced in response to the severe 1991 fiscal crisis. These rules have been effective: public debt has come down. The current fiscal framework does not rule out future fiscal crises, however. Spending is not sufficiently kept under control. Taxes are set procyclically, only to keep debt in check. Controls on debt sustainability require tighter spending rules, linked to levels of taxation