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 its fiscal compact. In this paper we fundamentally criticize the debt brake. We show that (1) it suffers from serious shortcomings, and its success is far from certain...

In an effort to correct worrisome trends in discretionary fiscal policy (deficit bias, procyclicality, and structural distortions), an increasing number of countries introduced a rules-based fiscal responsibility framework (FRF), characterized by fiscal policy rules, procedural rules,...