We discuss two essential problems of the political economy of public finances: The principal agent problem between voters and elected politicians and the common pool problem arising from the fact that money drawn from a general tax fund is used to pay for policies targeting more or less narrow...

Central banks invest their foreign exchange reserves predominantly in government bonds. The global accumulation of reserves therefore affects the equilibrium in the market for government bonds of reserve currency countries. By means of a panel data analysis we examine the relationship between...

This is the first study that analyzes whether budget balance expectations are anchored and whether budget balance rules effectively anchor expectations. To this end, we use a unique data set which covers budget balance expectations in 17 countries that implemented a budget balance rules. While...

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...

EMU driven interest rate convergence has led to a significant reduction of borrowing costs for some European governments in the second half of the nineties. The paper deals with the possible consequences for deficit behaviour. Although the impact of interest rates on deficits is a crucial...

The purpose of budget rules can be explored from the perspective of the expected results, obtained by their enforcement. On one hand, they are meant to improve or at least maintain certain levels of the budgetary deficit and public debt. On the other hand, they can help or limit the economic...

This paper uses a new data set on budgetary institutions in Europe to examine the impact of fiscal rules and budget procedures in EU countries on public finances. It briefly describes the main pattern of budgetary institutions and their determinants across the EU 15 member states. Empirical...

This study defines various fiscal indicators for different analytical purposes, adjusting for the distorting effect of creative accounting. It presents these indicators using the example of Hungary. The study abandons the general view that an identical balance is produced from the two...

We provide new estimates of the federal budget outlook over 10-year and long-term horizons under three sets of assumptions: the Congressional Budget Office baseline, which assumes no changes in current law; an extended policy scenario, in which it is assumed that future Congresses act more or...

Spending restraint is key to achieving a balanced federal budget over the next five years and should form part of Ottawa's March Budget. This Backgrounder demonstrates how to limit the rise in the federal debt by prudently reining in spending growth rather than raising taxes, so that past and...