A New Fiscal Rule: Should Israel Go Swiss?

29 Pages Posted: 14 Apr 2008  

Xavier Debrun

International Monetary Fund (IMF) - Research Department

Natan P. Epstein

International Monetary Fund (IMF)

Steven A. Symansky

International Monetary Fund (IMF)

Date Written: April 2008

Abstract

We propose a fiscal rule that fulfills a specific debt reduction objective while maintaining significant fiscal flexibility - two overarching concerns in Israel. Not unlike the Swiss "debt brake," the rule incorporates an error-correction mechanism (ECM) through which departure from the debt objective affects binding medium-run expenditure ceilings. Two variants of our ECM rule are shown to be superior to a comparable deficit rule in terms of attaining the debt objective and allowing for fiscal stabilization while supporting medium-term expenditure planning. Given its relative sophistication, a proper implementation of the ECM rule requires supportive fiscal institutions, including independent input and assessment.

Keywords: Working Paper, Israel

Suggested Citation

Debrun, Xavier and Epstein, Natan P. and Symansky, Steven A., A New Fiscal Rule: Should Israel Go Swiss? (April 2008). IMF Working Papers, Vol. , pp. 1-27, 2008. Available at SSRN: https://ssrn.com/abstract=1119427

Xavier Debrun (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8321 (Phone)
202-623-6343 (Fax)

Natan P. Epstein

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Steven A. Symansky

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
92
rank
261,602
Abstract Views
652
PlumX