In this paper, we describe key problems of the current EU’s fiscal framework and offer constructive options for its reform. A comprehensive reassessment of the rules is necessary, as the development of the rules has reached an impasse for both political and technical reasons. In our view,...

European authorities and scholars published proposals on which indicators of macroeconomic imbalances might be used to uncover risks for the sustainability of public debt in the European Union. We test the ability of four proposed sets of indicators to send early-warnings of debt crises using a...

This paper discusses an alternative route to a balanced budget, namely through debt control. Two models are compared: the debt brake which has been used in Switzerland since 2003 and the debt limitation model proposed by Compact for America. The paper concludes that the former, while apparently...

Congress has expressed interest, one way or the other, in a balanced-budget requirement for the past six decades. Yet despite numerous attempts, the legislative body has never passed a constitutional balanced-budget amendment. Most of the analysis of why we don't yet have a constitutional...

Should a government have more than one fiscal rule constraining fiscal aggregates? If so, why? In this paper, we present a dynamic general equilibrium model of a small open economy featuring an incumbent government to assess how and why implementing a budget balance rule and a debt anchor rule...

Adoption of fiscal rules and fiscal councils continued to increase globally over the last decades based on two new global datasets. During the pandemic, fiscal frameworks were put to test. The widespread use of escape clauses was one of the novelties in this crisis, which helped provide policy...

The European Union's constitutional balanced-budget amendment, the Stability and Growth Pact (SGP), dictates that EU member states keep their budget deficits within three percent of GDP and that government debt be kept at or below 60 percent of GDP. After 20 years, unintended consequences of the...

This paper provides an empirical analysis of the Macroeconomic Imbalance Procedure (MIP). It explores the relationship between sovereign bond yields spreads and the variables contained in the MIP scoreboard using quantile regressions. Results suggest that MIP indicators can explain the behavior...

This paper provides an empirical analysis of the Macroeconomic Imbalance Procedure (MIP). It explores the relationship between sovereign bond yields spreads and the variables contained in the MIP scoreboard using quantile regressions. Results suggest that MIP indicators can explain the behavior...

In this paper, we describe key problems of the current EU's fiscal framework and offer constructive alternatives to reforming it. A comprehensive reassessment of the rules is necessary, as the development of the rules has reached an impasse for both political and technical reasons. In our view,...