The paper revisits the empirical link between fiscal policy and macroeconomic stability. Our basic presumption is that by definition, the operation of automatic stabilizers should always and everywhere contribute to greater macroeconomic stability (output and consumption). However, two stylized...

Using real-time data from Europe's Stability and Convergence Programs, we explore how fiscal plans and their implementation in the EU are determined. We find that (1) implemented budgetary adjustment falls systematically short of planned adjustment and this shortfall increases with the...

The paper examines the joint impact of inflation targeting (IT) and fiscal rules (FR) on fiscal behavior and inflation in a broad panel of advanced and developing economies over the period 1990-2009. The main contribution of the paper is to show that, as suggested by the theoretical literature,...

Institutions aimed at constraining policy discretion to promote sound fiscal policies are once again at the forefront of the policy debate. Interest in “fiscal councils,†independent watchdogs active in the public debate, has grown rapidly in recent years. This paper presents the first...

The German debt brake is often regarded as a great success story and has therefore served as a role model for the Euro area and it’s Fiscal Compact. In this paper we fundamentally criticise the debt brake. Firstly, we show that it suffers from serious shortcomings and that its success is...

We explore how fiscal policies in the OECD have responded to unexpected information about the economy during the period 1995-2006. In particular, we first estimate standard fiscal rules using ex-ante data (i.e. forecasts). We then estimate how fiscal policy reacts to new information, especially...