Fiscal Rules and Fiscal Performance in the EU and Japan
Jürgen Von Hagen
University of Bonn - Institute of Economic Policy; Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. 5330
Fiscal rules specify quantitative targets for key budgetary aggregates. In this paper, we review the experience with such rules in Japan and in the EU. Comparing the performance of fiscal policy in the 1980s and 1990s until 2003, we find that the fiscal rule of the 1980s exerted some but not much disciplinary influence on Japanese fiscal policy. The fiscal rule of the Maastricht Treaty had a significant impact on political budget cycles in the EU, but did little to constrain fiscal policy in the large member states. Since the start of the European Monetary Union, the disciplinary effect of the fiscal rule in the EU has vanished. Next, we discuss the importance of budgetary institutions for the effectiveness of fiscal rules. In Europe, a number of countries adopted strong fiscal rules, i.e., a fiscal rule combined with a design of the budget process enabling governments to commit to the rule. We find that strong fiscal rules have been effective. We conclude with some suggestions for the design of a strong fiscal rule in Japan.
Number of Pages in PDF File: 46
Keywords: Fiscal policy, government budgeting, political budget cycles
JEL Classification: H11, H61, H62working papers series
Date posted: January 5, 2006
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo5 in 0.719 seconds