Fiscal rules are argued to be important for sound and sustainable fiscal policies and have been increasingly adopted over the last 20 years. However, as increased fiscal pressure and fiscal risks urge countries to address the public debt legacy left by recent economic crises, fiscal rules come...

This paper examines the impact of budgetary institutions on public finances in the European Union on the basis of a critical survey of the relevant theoretical and empirical literature. In general, the authors find that fiscal institutions (namely fiscal rules) have successfully contributed to...

We study the desirability of limits on the public debt and of political turnover in an economy where incumbents have an incentive to set public expenditures above the socially optimal level due to rent-seeking motives. Parties alternate in office and cannot commit to future policies, but they...

Governments can issue public debt for both good and bad reasons. The former include intertemporal tax smoothing, fiscal stimulus, and asset management. In contrast, the bad reasons, which generate higher indebtedness, are mainly associated with political cycles, rent capture, intergenerational...

This paper discusses the rationale and options for a fiscal anchor for South Africa and its potential for restoring and maintaining fiscal sustainability. It argues that a well designed fiscal anchor can be useful in the current fiscal milieu, but notes that the popularity of fiscal rules belies...

Fiscal rules, such as the Excessive Deficit Procedure and the Stability and Growth Pact (SGP), aim at constraining government behavior. Milesi-Ferretti (2003) develops a model in which governments circumvent such rules by reverting to creative accounting. The amount of this depends on the...

Uncertainty about the future preferences of the government may induce policy makers to run excessive budget deficits. As a solution to this problem, economists have proposed to impose a binding debt rule. In this paper we argue that a binding debt rule does not eliminate the distortions due to...

A fiscal rule imposed when the budget is not transparent yields more creative accounting to circumvent it and less fiscal adjustment, generating hidden deficits/debts in public sector. This study focuses on creative accounting practices of governments and adds to the literature by measuring...

A fiscal rule imposed when the budget is not transparent yields more creative accounting to circumvent it and less fiscal adjustment, generating hidden deficits/debts in public sector. This study focuses on creative accounting practices of governments and adds to the literature by measuring...

We assess the drivers of fiscal sustainability in 20 OECD economies between 1950 and 2019. We find stable long-term relationships between government revenues and expenditures as well as between the primary budget balance and past public debt ratio for the full panel. Performing an expanding...